Tit-for-tat Trump tariffs to take trans-Pacific trade toll
The trade war between the US and China escalated today as the world’s two largest economies imposed tit-for-tat tariffs on goods worth hundreds of billions of dollars.
The Chinese commerce ministry said it had to retaliate against America's decision to levy 10 per cent tariffs on $200bn (£150bn) worth of Chinese goods from 24 September to "defend its legitimate rights and interests", according to a statement on the State Council's website. The US tariff level will rise to 25 per cent at the end of 2018.
China is set to respond to US President Donald Trump's new levies by imposing duties of five and 10 per cent – less than previously threatened – on an additional $60bn (£45.6bn) of US goods.
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Trump accused the Chinese government of trying to influence midterm elections by targeting agricultural products produced in states with strong Republican votes.
He tweeted: “There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!”
The latest round of tariffs represent a “major escalation”, with the threat of Chinese growth falling below a six per cent annual rate, according to Louis Kuijs, head of Asia economics at Oxford Economics, a consultancy.
The trade dispute is weighing on investor sentiment, with optimism among fund managers on global growth prospects hitting a six-year low, according to a survey published today by Bank of America Merrill Lynch. A trade war escalation is the most cited tail risk by investors for the fourth straight month, while a China slowdown is the second biggest risk.
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Yet Apple chief executive Tim Cook today said he is “optimistic” the two sides can reach a deal “because trade is one of those things where it’s not a zero-sum game.”
“You and I can trade something and we can both win,” Cook told ABC News’ “Good Morning America” programme. “So I’m optimistic that the two countries will sort this out and life will go on.”
Markets also remained sanguine, with the S&P 500 and the Dow Jones Industrial Average both gaining ground at the time of writing. Investor reaction was limited as the tariffs were already priced in, according to Larry Hatheway, chief economist at asset manager GAM.
However, he warned: “Investors risk being overly complacent about the eventual outcome, which could still escalate with potentially very adverse spillover effects on broader economic activity.”
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