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"The U.S.-China trade war has no clear end in sight"

posted onSeptember 24, 2018

The latest tranches of tariffs between the United States and China went into effect Monday. 
Washington hit $200 billion worth of China's exports with a 10%
tariff while Beijing introduced levies of 5% and 10% on $60 billion worth of US goods. 

This is the third set of tariffs Washington has placed on Chinese goods this year alone and targets almost 6,000 items, including rice, furniture and textiles meaning households may start to feel the pinch of higher prices. The tax is set to rise at the end of the year from 10% to 25% unless the two countries agree a deal. 

In contrast, Chinese President Xi Jinping's government said it would place an additional 5% in duty on US products including smaller aircraft, computers and textiles, and an extra 10% on goods such as chemicals, meat, wheat and wine. China also warned it would respond to any rise in U.S. tariffs on Chinese products accordingly. 

Just hours after the world's two largest economies imposed fresh duties on each other's goods, Xinhua news agency said that Washington is engaging in "trade bullyism"

But Beijing also said it was open to trade negotiations with the United States if the talks are "based on mutual respect and equality," according to Xinhua.

Some analysts say there is a risk that China could allow its yuan currency to weaken to boost exports but Premier Li Keqiang said last week that his country "will never go down the path of stimulating exports by devaluating its currency". 

Many now expect the Trump administration will go ahead with a fourth round of tariffs. That would mean the U.S. measures effectively cover all China's annual goods exports to the United States (the total for 2017 was about $506 billion). 

"The U.S.-China trade war has no clear end in sight" Rob Carnell, chief Asia economist at ING, said in a note to clients.