A trade war between the world's two largest economies has officially started. U.S. tariffs on $34bn of Chinese goods came into effect on Friday with China retaliating by imposing tariffs also worth a total of $34bn of U.S. goods, accusing Washington of triggering the “largest-scale trade war in economic history".
“China promised not to fire the first shot, but in order to safeguard the country’s core interests as well as that of the people, it is forced to fight back,” a spokesperson for China’s Ministry of Commerce said according to Xinhua news agency.
China's Ministry of Commerce also said it would look to report the U.S. to the World Trade Organization on Friday, accusing Washington of breaching international trade laws. The Trump administration's 25% tariffs affect more than 800 Chinese products such as water boilers, X-ray machine components, airplane tires and various other industrial parts.
China has retaliated by imposing a similar 25% tariff on 545 US products, including soybeans, pork and electric vehicles. Trump on Thursday told reporters the amount of goods subject to tariffs could rise to more than $500bn.
According to China’s central banker, Trump’s promised tariffs of 25% on $50bn of Chinese goods – (Friday’s $34bn, plus another $16 bn are expected to go into effect in two weeks)– would shave 0.2 percentage points off of China’s GDP and the “overall impact would be limited”.
The imposition of the tariffs had little impact on Asian stock markets. The Shanghai Composite closed 0.46% higher, Shenzhen's Composite advanced 0.44% while Hong Kong's Hang Seng was up 0.47%. Japan's Nikkei gained 1.12% while Seoul's KOSPI grew 0.68%.
Morgan Stanley said the US tariffs imposed so far would affect the equivalent of 0.6% of global trade and account for 0.1% of global GDP. Analysts are concerned about how far the hostilities between Washington and Beijing will go.
With reporting by Reuters, Xinhua