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US and China fire first shots in $34bn trade war

July 6, 2018

 

US tariffs on $34bn (£25.7bn) of Chinese goods have come into effect, signalling the start of a trade war between the world's two largest economies.

The 25% levy came into effect at midnight Washington time.

 

China has retaliated by imposing a similar 25% tariff on 545 US products, also worth a total of $34bn.

 

Beijing accused the US of starting the "largest trade war in economic history".

"The Chinese side, having vowed not to fire the first shot, is forced to stage counter-attacks to protect the... interests of its people," the Chinese Commerce Ministry said.

 

Two companies in Shanghai told the BBC that customs authorities were delaying clearance processes for US imports on Friday.

 

Earlier this year, President Donald Trump ordered the US to impose tariffs on $50bn worth of Chinese goods and the first round of these kicked in on Friday.

 

The imposition of the tariffs had little impact on Asian stock markets. Shanghai fell in morning trade before recovering to stand 0.6% higher, while markets in Hong Kong and Tokyo both rose 1.3%.

 

Hikaru Sato at Daiwa Securities said markets had already factored in the impact of the first round of tariffs.

 

The tariffs are part of Mr Trump's protectionist agenda, which has undermined the free trade policies that have shaped the global exchange of goods in recent decades.

 

He has said the tariffs are aimed at stopping the "unfair transfers of American technology and intellectual property to China" and protecting jobs.

 

The White House said it would consult on tariffs on the other $16bn of products, which Mr Trump has suggested could come into effect later this month.

 

The president has already imposed tariffs on imported washing machines and solar panels, and started charging levies on the imports of steel and aluminium from the European Union, Mexico and Canada.

 

Mr Trump has threatened a 10% levy on an additional $200bn of Chinese goods if Beijng "refuses to change its practices".

 

He upped the stakes on Thursday, saying the amount of goods subject to tariffs could rise to more than $500bn.

 

"You have another 16 [billion dollars] in two weeks, and then, as you know, we have $200bn in abeyance and then after the $200bn, we have $300bn in abeyance. OK? So we have 50 plus 200 plus almost 300," he said.

 

The US tariffs announced so far would affect the equivalent of 0.6% of global trade and account for 0.1% of global GDP, according to Morgan Stanley in a research note issued before Mr Trump's comments on Thursday.

 

Analysts are also concerned about the impact on others in the supply chain and about an escalation of tensions between the US and China in general.

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