U.S., China escalate trade war, impose more tariffs

BEIJING/WASHINGTON (Reuters) – The United States and China escalated their acrimonious trade war on Thursday, implementing punitive 25 percent tariffs on $16 billion worth of each other’s goods.

The latest round brings to $50 billion the value of imports subjected to tariffs on either side since early July, and more are in the pipeline, adding to risks for global economic growth.

China’s Commerce Ministry said Washington was “remaining obstinate” by implementing the latest tariffs.

“China resolutely opposes this, and will continue to take necessary countermeasures,” it said in a brief statement shortly after mid-day.

“At the same time, to safeguard free trade and multilateral systems, and defend its own lawful interests, China will file suit regarding these tariff measures under the WTO dispute resolution mechanism,” it said.

Washington is holding hearings this week on a proposed list of an additional $200 billion worth of Chinese imports to face duties.

U.S. Customs and Border Protection had confirmed on its website that at 12:01 a.m. EDT (0401 GMT) on Thursday, which is just past noon in Beijing, it would begin collecting extra 25 percent duties on 279 Chinese import product categories.

China’s official Xinhua news agency said Beijing’s own tariffs took effect at 12:01 p.m. local time, as scheduled.

The tariffs took effect amid two days of talks in Washington between mid-level officials from both sides, the first formal negotiations since U.S. Commerce Secretary met with Chinese economic adviser Liu He in Beijing in June.

Business groups expressed hope that the meeting would mark the start of serious negotiations over Chinese trade and economic policy changes demanded by President Donald Trump.

However, Trump on Monday told Reuters in an interview that he did not “anticipate much” from the talks led by U.S. Treasury Under Secretary David Malpass and Chinese Commerce Vice Minister Wang Shouwen.

Economists reckon that every $100 billion of imports affected by tariffs would reduce global trade by around 0.5 percent.

They have assumed a direct impact on China’s economic growth in 2018 of 0.1-0.3 percentage points, and somewhat less for the United States, but the impact will be bigger next year, along with collateral damage for other countries and companies tied into China’s global supply chains.

HARD LINE RATTLES BEIJING

Trump has threatened to impose duties on virtually all of the more than $500 billion of Chinese goods exported annually to the United States unless Beijing agrees to sweeping changes to its intellectual property practices, industrial subsidy programs and tariff structures and buys more U.S. goods.

That figure would be far more than China imports from the United States, raising concerns that Beijing could consider other types of retaliation, such as making life more difficult for American firms in China or allowing its yuan currency to weaken further to support its exporters.

Trump’s hard line has rattled Beijing and spurred rate criticism within the highest levels of China’s ruling Communist Party over its handling of the trade war, sources have said.

Beijing has denied U.S. allegations that it systematically forces the unfair transfer of U.S. technology and has said that it adheres to World Trade Organization rules.

Washington’s latest tariffs apply to products including semiconductors, plastics, chemicals and railway equipment that the Office of the U.S. Trade Representative has said benefit from Beijing’s “Made in China 2025” industrial plan to make China competitive in high-tech industries.

China’s list of 333 U.S. product categories hit with duties includes coal, copper scrap, fuel, steel products, buses and medical equipment.

Some business groups have warned about the impact of escalating tariffs.

CompTIA, a technology trade group, called the new U.S. tariffs on tech products “irresponsible and misguided.”

“These tariffs will not only severely undercut the U.S.’s global competitiveness and leadership in cutting-edge technologies, but also threatens America’s national security infrastructure,” Elizabeth Hyman, the group’s executive vice president for public advocacy, said in a statement.