China Trade War Is Getting Ugly Fast

China EU USA trade war alliance Donald Trump President Xi

China is expected to match the move with a 25 percent levy on U.S. goods to the same value on the same day.

The row has caused turbulence on the world's stock markets and could hurt global trade and growth.

Speaking to reporters late Thursday en route to a campaign-style rally in Montana, just before tariffs on U$34 billion worth of Chinese imports were set to go into effect, Trump said there are more to come.

But China also believes that its economy, with a greater focus on domestic demand and a reduced dependence on exports, can ride out the storm.

This trade war will hit American agricultural exports such as pork and soybean hard, but if President Trump ups the ante, products like televisions and other household goods could also be hit, meaning consumers will face higher prices, Matthew Shay, president of the National Retail Federation, told the Associated Press.

The world's two largest economies, the USA and China, are locked in a worsening trade battle that could have unexpected side effects on the global economy.

How did we get here?

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External observers have widely criticized this approach, saying such protectionist rhetoric undermines free trade policies that have shaped the global exchange of goods in recent decades.

Wall Street is well conditioned to ignore the often hyperbolic words of US President Donald Trump, and on Friday investors shrugged off comments that his administration is ready to massively escalate a tariff battle that began in earnest on Friday. Part of his plan is to radically change how U.S. trade deals work and to focus on protecting the domestic economy. The U.S. Chamber of Commerce this week released state-by-state data of the damage coming from tariffs, and 17 of the 20 worst hit states voted for Mr. Trump in 2016.

He threatened a 10 percent levy on an additional $US200b of Chinese goods if Beijng "refuses to change its practices".

Beijing had said it would retaliate with punitive measures on United States products worth a similar amount, including soybeans, pork and cotton, but it had not officially confirmed that they had taken effect.

What could the fallout be?

The company blamed it on the trade dispute between the USA and China, saying the tariffs will result in "fewer than expected SUV sales and higher than expected costs".

Supply chains will also be negatively affected, said Cliff Tan, head of global market researchat Japan's MUFG Bank in Hong Kong. Another $16 billion of goods could follow in two weeks, Trump earlier told reporters, before suggesting the final total could eventually reach $550 billion, a figure that exceeds all of USA goods imports from China in 2017. Instead, he should be talking about reciprocity and allowing American companies the same rights in China that America grants Chinese companies when they try to invest and operate in the United States.

As the tariffs approached, the United States central bank warned the impending trade battle was beginning to darken the otherwise blue skies of the robust American economy, now in its 10th year of recovery. The yuan, which has weakened sharply against a broadly strong USA dollar in recent weeks, was trading at 6.6480 per dollar as of 4:30 p.m. If the United States and China cool off after a first round of tariffs, the fallout will be modest, according to Bloomberg Economics.

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