Trade war could undermine Trump's strength

Trade war could undermine Trump's strength

A man looks at an electronic board showing stock information at a brokerage house in Shanghai, China July 6, 2018.

Tariffs on US$34 billion worth of Chinese goods, the first of a potential total of US$450 billion, are due to kick in on Friday over United States complaints that China is misappropriating USA technology.

The Trump administration is poised to impose taxes on $50 billion of Chinese imports in high-tech industries, such as robotics, aerospace, and industrial machinery, in an attempt to punish Beijing for intellectual property theft and to rebalance a trade deficit. It's very hard for American companies in the auto sector or in financial services to sell into the China market, because there's a lot of regulatory barriers.

Ok, so it's not a real war - but the U.S. and China are at the beginning of a trade war - and no-one knows just how bad it could get.

Trump's confrontational outlook applies to other trading partners as well as China, said Tai Hui, chief strategist for JP Morgan Asset Management, in a report. Some contend that containing China's technological progress is his real goal and that is why the list of tariffs targets Chinese industries such as aerospace, telecoms and artificial intelligence...

Today's tariffs could mark the opening skirmishes of an escalating tit-for-tat trade war, as Trump has vowed to impose duties on as much as $450 billion in Chinese goods-the vast majority of all of China's exports to the USA, according to AFP in Beijing. US shipments have almost ground to a halt since the 25 percent tariffs implemented on April 2.

Chinese Commerce Ministry spokesman Feng Gao said that the proposed US tariffs would hit many American and foreign companies operating in China and disrupt their supplies of components and assembly work. These include soybeans and automobiles.

USA officials are using section 301 of the U.S. trade act to justify the 25-percent tariffs.

"They firmly believe that free trade is a powerful engine for global economic growth".

Even the first round of tariffs means that "American consumers are one step closer to feeling the full effects of a trade war", said Matthew Shay, president of the National Retail Federation.

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Asian markets lost a significant amount of value today, in response to the imposition of tariffs from both sides.

Major currencies were treading water as traders fretted about the fallout of the intensifying trade frictions between Washington and the rest of the world.

Beijing has announced changes this year including easing limits on foreign ownership in insurance and some other fields.

The move comes after President Trump has repeatedly decried the USA trade deficit with China, which totaled over 375 billion dollars past year.

Local customs at the port of Qingdao have let through American products they held up on Friday, and imposed higher tariffs on the goods, according to a trader briefed by a customs official at the port.

If his administration went ahead with that threat, it would raise the total of targeted Chinese goods to potentially $550 billion - more than the $506 billion that China actually shipped to the United States previous year.

Chinese officials reject accusations they steal or force foreign companies to hand over technology.

Other governments express similar complaints toward Beijing, but Washington has alienated potential allies by raising import duties on steel, aluminum and autos from Europe, Canada, Mexico and Japan.

Signs of nervousness about the trade outlook were evident elsewhere in global markets with the Japanese yen and the Swiss franc firm against the dollar while core USA and German bonds were in demand.

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