Likely impact of US-China trade war: Prices up, growth down

Likely impact of US-China trade war: Prices up, growth down

China retaliated with taxes on an equal amount of USA products, including soybeans, pork and electric cars, calling the move the start of the "biggest trade war in economic history".

That would bring the total of targeted Chinese goods to potentially $550 billion - more than the $506 billion in goods that China actually shipped to the United States a year ago. After exchanging several threats over the last few months, both the United States and China implemented a tariff of 25% on imports worth $34 billion last Friday.

China retaliated with tariffs on a similar amount of goods.

U.S. crude stood 0.2 per cent higher at $US73.09 a barrel.

Russian Federation says it has raised tariffs on some US imports in response to the USA move to impose tariffs on foreign steel and aluminum.

European leaders hadresponded, with German Chancellor Angela Merkel saying she'd be willing to back cuts on tariffs on USA cars imported to the European Union as part of a reciprocal agreement to resolve a trade spat with Washington.

A record volume of USA crude oil is heading to China even as Beijing's planned tariffs threaten to cut off a relatively new and burgeoning business for US exporters. He noted that the new Russian tariffs will only allow a partial compensation of $87.6 million.

After that, the hostilities could intensify: Trump said the ready to target an additional $200 billion in Chinese imports - then $300 billion more - if Beijing refuses to yield to US demands and continues to retaliate. Analyst said that the market already had reflected the impact earlier. No exact date was given.

Global institutions including the International Monetary Fund and JP Morgan estimate that when major economies start leveling tariffs at 20 percent, world trade will shrink 7.9 percentage points by 2020 and global economic growth will shrink 1.3 percentage points. The tariffs on the European Union went into force on June 1.

Some of Trump's fellow Republicans in the U.S. Congress lashed out at his actions. The European slammed the move as protectionism and slapped counter-measures on US products.

"Trade war is never a solution", Chinese Premier Li Keqiang said at a news briefing with Bulgarian Prime Minister Boyko Borissov in Sofia before a summit with 16 central and eastern European countries. "We should be working with our allies to isolate China rather than escalate a trade war", said Senator Jerry Moran, who represents the agriculture-heavy state of Kansas. He did not specify which measures.

"China is engaged in industrial policies and theft of intellectual property that merits a response, but across the business community we feel that tariffs are not the answer", John Murphy, senior vice president for worldwide policy at the U.S. Chamber of Commerce, told CNBC.

He says: "If someone insists on waging a trade war, it would hurt others as well as themselves".

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Washington has since told countries they must stop buying the OPEC producer's oil from November, 4 or face financial consequences. Iran has been committed to its obligations under the deal, he stressed.

Initial market estimates of the impact of tit-for-tat Chinese and USA tariffs have been modest.

The US itself has also lodged more than 100 complaints with the WTO against imports or the trade policies of nine countries and the EU.

President Donald Trump on Monday warned the WTO that if the USA isn't treated "properly, we will be doing something".

In the run-up to Friday, there was no sign of renewed negotiations between USA and Chinese officials, business sources in Washington and Beijing said.

It might also affect Bangladesh's remittance earnings if the trade war would prolong and caused global economic slowdown, he added.

He said: "It is an infernal logic, a unsafe logic, a logic that is in nobody's interest, starting with the U.S".

Richard Wilkins said he's "very concerned" that China's response to tariffs imposed by the United States on Chinese goods will cost farmers money, and he hopes the administration has a change of heart. And he has subjected most of America's trading partners to tariffs on steel and aluminum.

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

Harley Davidson drew attention in June when it warned of a financial toll from trade tensions, and the trade dispute in general has created uncertainty for investors struggling to value stocks at a time strong corporate profits might otherwise help carry the bull market through its 10th year. Japan's main stock index, the Nikkei 225, gained 1.1% while the Shanghai Composite Index added 0.5%.

The S&P 500 index rose 23.21 points, or 0.8%, to 2,759.82.

"The actual companies that would suffer will be multinational companies that supply intermediate goods to China", said Yang Pyeong-seob, head of KIEP's global research center.

Carney compared the uncertainty on trade to the bank's effort to bolster the United Kingdom economy ahead of Britain's departure from the European Union.

A ministry statement said, "the Chinese side promised not to fire the first shot, but to defend the core interests of the country and people, it is forced to make a necessary counterattack". And American suppliers of soybeans, pork and whiskey could lose their competitive edge in China.

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