Beijing accused Donald Trump of “trade bullying” as it imposed retaliatory tariffs against new US duties on $34bn of Chinese imports on Friday in the biggest escalation yet in a trade war between the world’s two largest economies.
The consequences of a trade war that could threaten global supply chains have alarmed governments and multinational corporations around the world. But Mr Trump has continued to raise the stakes, threatening to extend levies to all $500bn of goods imported from China in a blunt outline of his plans to escalate the fight.
“This act is typical trade bullying,” China’s ministry of commerce said on its website on Friday, adding that it “seriously jeopardises the global industrial chain [and] hinders the pace of global economic recovery”.
Ahead of the implementation on Friday of tariffs on 818 different product categories of imports from China, ranging from electric cars to industrial lathes, Mr Trump reiterated his plans to continue to squeeze China in the months ahead.
A further $16bn in imports would be targeted in the coming weeks and, if China continued to retaliate, a further $200bn would follow. “And then after the $200bn we have $300bn in abeyance, OK?” he told reporters on Thursday. The $500bn threat would cover almost all US imports from China, which reached $505.5bn in 2017.
In retaliation, China is targeting US farm and energy exports, including soyabeans, a top export of US states that supported Mr Trump, and crude oil.
US officials pointed to robust US jobs numbers published on Friday as a sign that the domestic economy could weather any short-term negative consequences of a trade war. They also continued to insist that Mr Trump was out to provoke US trading partners like China into negotiations to mend years of trade imbalances that have hurt American workers.
“There isn’t clear evidence in the data that the anxiety over trade is being harmful to the industries that we would most watch for harm in,” Kevin Hassett, the chairman of Mr Trump’s council of economic advisers, told Bloomberg Television. “If they were really concerned about it, we would have expected to see lay-offs.”
The US in June added 213,000 jobs, including 36,000 jobs in the manufacturing sector at the heart of Mr Trump’s trade efforts. It also saw 600,000 people rejoin the labour force.
But business groups in the US insist that they are already beginning to feel the pain of Mr Trump’s aggressive trade policies, which have been raising input costs for businesses and are likely to lead to lay-offs.
“We are not yet seeing the full impact. But it will come,” said Kip Eideberg, a spokesman for the Association of Equipment Manufacturers.
That view was backed up by the Federal Reserve which in the minutes of its June meeting expressed concern about the economic impact of Mr Trump’s trade policies and reported that businesses were telling it that tariffs were already causing them to put investments on hold or reduce them.
Executives within China are also braced for retaliatory action against US companies including inspections, audits and shipment delays. An alarmed American Chamber of Commerce in Beijing said its members were opposed to the trade war.
“While our 900 member companies continue to suffer from not having a level playing field in China, they are still extremely clear: increased tensions in the US-China economic relationship will negatively impact their operations in China,” AmCham chairman William Zarit said.
In an illustration of the trade being caught in the crossfire of Mr Trump’s actions, the Peak Pegasus, a ship full of American soyabeans, raced on Friday to berth at the port of Dalian before Chinese tariffs took effect. But the ship was too late — customs officials said they received orders at 3pm to implement tariffs on US cargoes.
“The evidence of pain from a now multi-front trade war is multiplying every day,” said Brian Kuehl, executive director of Farmers for Free Trade, a lobby group. “From China cancelling soyabean orders, to cheese exports to Mexico plummeting, to farm equipment prices rising, the stories of financial loss are now rolling in from farms across America.”
Many US companies expect China to shift business to their competitors in Europe or Asia, in a pointed reminder that, as Mr Xi said last month, “when one door closes, another opens”. The combination of new tariffs on American cars with China’s rollback of normal import duties will, for instance, make cars imported from the US significantly more expensive than their German or Japanese rivals.
But China is determined to act only in “self-defence”, said Tu Xinquan, a trade expert at the University of International Business and Economics in Beijing. “We’ll wait to see what Trump does next. We certainly won’t take the first step.”
Additional reporting by Sherry Fei Ju and Archie Zhang in Beijing
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