Trump's $500 billion trade threat makes China's already battered investors shiver

Products of beans made by a US company are displayed for sale at an worldwide supermarket Jenny Lou's in Beijing, China June 29, 2018.

Donald Trump has threatened to impose tariffs worth hundreds of billions of dollars on Chinese imports to the USA as a trade war between the world's two largest economies began on Friday.

The Trump administration's 25% tariffs affect more than 800 Chinese products worth $34 billion such as industrial machinery, medical devices and auto parts.

The president said US tariffs on an additional $16 billion in Chinese goods are set to take effect in two weeks.

It is unclear whether the soybean cargo, which did not arrive until after the penalties took effect, will pay the 25 percent higher tariff.

In Beijing, the Ministry of Commerce issued a statement shortly after the U.S. tariffs kicked in accusing the United States of igniting "the largest trade war in economic history".

Chinese President Xi Jinping (left) and US President Donald Trump in Florida a year ago.

The ministry called the United States actions "a violation of world trade rules" and said that it had "initiated the largest-scale trade war in economic history".

"Trade war is never a solution", said Chinese Premier Li Keqiang.

Thus, the core of the global trading system progressively built up over the past 70 years and the global supply chains and financial system developed over recent decades to facilitate global trade and investment are under threat, along with the still-fragile recovery in the global economy from the financial crisis.

"I think products made in China are the best", said one shopper in a Beijing grocery story, who gave his name as Yang.

Peak Pegasus, together with numerous other trade companies and businessmen, will become the victims of this trade war. The reality is that trade wars are damaging to everyone, not just the participants, and no one will "win".

The 10 per cent fall in the Shanghai stock market over the past weeks might not be wholly attributable to the trade war.

In addition to the $US16b under consultation, Mr Trump has flagged there could be more tariffs in store. Asian equities wobbled but also managed to end up.

On Thursday, a spokesperson for China's ministry of commerce said the USA will be "opening fire on the whole world and also opening fire on itself".

"The bigger the size (of imports facing tariffs), the bigger the potential that the GDP impact is larger than a linear extrapolation would suggest", said Aidan Yao, senior emerging Asia economist at AXA Investment Managers in Hong Kong. The products, all sold on Chinese e-commerce platforms, ranged from pet food to mixed nuts and whiskey.

American companies doing business in China are particularly anxious. China's tariffs similarly totals to $34 billion.

Chinese economist Hu Xingdou said that while China's development would be affected by the trade war, the effects would not be too deep so long as it kept its doors open and deepened its reforms.

Amidst a trade war between the United States and China, a Chinese company is manufacturing flags for President Donald Trump's 2020 re-election campaign, a media report said. He added the USA is ready to target an additional $200 billion, and then $300 billion more should Beijing retaliate. The rest of the world would suffer collateral damage, even if the U.S. were to refrain from penalising imports from other countries.

But the conflict could soon escalate.

The state-run China Daily accused the Trump administration of "behaving like a gang of hoodlums", saying that they would damage the global economy unless other countries stop them.

(Copyright © 2015. All Rights Reserved.)
 
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