US, China firms brace for escalating trade war

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Hours after the U.S. announcement - China's Finance Ministry issued a list of 545 product categories, also covering about US$34 billion in exports from the United States, to be subject to an additional 25 percent tariff starting 6 July.

The announcement was sure to spark countermeasures by Beijing, which yesterday vowed to strike back quickly if the USA hurts its interests, bringing the world's two largest economies to the brink of an all-out trade war long feared by markets and industry.

The ministry also said it was scrapping an earlier deal to buy more American farms goods, natural gas and other products that had been aimed at narrowing Beijing's multibillion-dollar trade surplus with the United States.

"All the economic and trade-related achievements previously reached by the two sides will be rendered invalid", the ministry said, referring to the results of earlier rounds of China-US trade talks.

Analysts at Capital Economics said the impact of the tariffs on China's economy would be small. "The Chinese side firmly opposes that", the Chinese commerce ministry said in a statement.

The U.S. announcement follows a U.S. Trade Representative's section 301 investigation into China's trade practices that recently concluded.

"U.S. -China trade tensions will be long-lasting", Yifan Hu, regional chief investment officer and chief China economist at UBS Wealth Management, told a briefing in Beijing.

The list of products issued by USA trade representative covers 1,102 separate U.S. tariff lines valued at approximately $50 billion in 2018 trade values.

Billions in new tariffs signal start of US-China 'trade war'
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"The question is, does the Trump administration really want to negotiate with China, or just draw blood and only after that start a serious negotiation with the Chinese?" said Scott Kennedy, deputy director of China studies at the Center for Strategic and International Studies in Washington.

They are part of a $50 billion list of Chinese exports targeted for a 25 percent tariff hike in response to complaints Beijing steals or pressures foreign companies to hand over technology. That includes a tentative deal to increase Chinese purchases of USA energy and agricultural goods. They say those violate Chinese market-opening commitments under the World Trade Organization (WTO).

"This situation is no longer sustainable", Trump said.

"In a meeting with the President last week, I outlined the importance of ensuring that valuable export markets remain open and American products do not face a competitive disadvantage due to retaliatory tariffs, such as those announced today by China", Republican Sen.

Beijing and Washington have held three rounds of high-level talks since early last month that have yet to yield a compromise, with Trump unmoved by a Chinese offer to buy an additional US$70 billion of United States farm and energy products and other goods, people familiar with the matter have said.

Escalation looms. In April, Trump asked officials to consider an additional US$100 billion in levies.

And he warned that any retaliation by Beijing would trigger another round of tariffs on Chinese goods. The Dow industrials .DJI fell almost 1 percent on Friday.

"The wise man builds bridges, the fool builds walls", the official Xinhua news agency said in an editorial, echoing official comments that China would defend its interests in a trade war.

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