US tariffs take effect, China retaliates

Alicia Cross
July 6, 2018

The dollar fell Friday as markets weighed a stronger-than-expected jobs market with an escalating trade battle between the U.S. and China.

China will "absolutely not" fire the first shot in a trade war with the United States and will not be the first to levy tariffs, its finance ministry said on Wednesday.

The Trump administration imposed tariffs of 25% on some $34 billion in Chinese imports starting at midnight Friday.

However, while no details have been provided as yet, it looks like a Chinese retaliation may be in the works.

"There should be no doubting Beijing's resolve", the newspaper said.

The tariffs would mark a significant escalation in the trade dispute between the world's two biggest economies.

The big question is how far the hostilities between Washington and Beijing will go.

A China central bank adviser said the planned United States import tariffs on $50 billion worth of Chinese goods - $34 billion plus a planned follow-on list worth $16 billion - will cut China's economic growth by 0.2 percentage points, although the overall impact would be limited, the official Xinhua news agency reported Friday.

This will be affected by how high individual tariffs are, and also if they are expanded to other countries like Canada, Mexico and the European Union.

China responded as expected today to USA tariffs on $34 billion in Chinese imports (pdf) taking effect, with Beijing quickly announcing roughly equivalent retaliatory measures.

China was previously slated to begin imposing its tariffs about 12 hours earlier due to the time difference, according to multiple reports. 34 and then you have another 16 in two weeks, and then, as you know, we have 200 billion in abeyance, and then after the 200 billion we have 300 billion in abeyance.

The Chinese government said that it was "forced to counterattack" against U.S. punitive tariffs on its imports, which went into effect early on Friday.

But it remained to be seen whether the American president would carry out recent threats to respond to any Chinese retaliation with maximum pressure - raising United States duties on Chinese goods in increments of $200 billion until virtually all the goods America buys from its largest trading partner are subject to duties.

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A person with knowledge of the plan earlier told Reuters China's threatened tariffs on $34 billion of USA goods would take effect from the beginning of the day on Friday.

A spokesman for China's Ministry of Commerce said Thursday that the United States was just hurting itself.

He warned that the USA tariffs will hurt a lot of foreign companies that export goods from China to the United States.

"We buy stuff from America, and America is buying stuff from China".

"China would never start a trade war but if any party resorts to an increase of tariffs then China will take measures in response to protect development interests".

"China, which is in the crosshairs of the Trump administration's racketeering gun sights, has no choice but to fight back". Chinese exporters have reported USA orders fell off ahead of the tariff hike.

But if the scope of the tariffs widened then New Zealand could be affected - either through intermediary goods sold into the USA or China for further processing or because markets were disrupted more broadly. "It's very hard to see this happening in the current environment".

Despite the looming trade war between China and the US, flags for US President Donald Trump's re-election campaign are under production in China as told by Li Jiang, a Chinese flag manufacturer.

The two giant economies appear ready to see which side can endure the most pain.

"The U.S. has maintained hegemony in the military and financial fields for many decades".

"They're holding everything. because there's uncertainty", he said.

"I would be ready to support negotiations on reducing tariffs, but we would not be able to do this only with the U.S.", she said.

Other reports by Free-Prsite

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