How a trade war could turn into a recession

China EU USA trade war alliance Donald Trump President Xi

China EU USA trade war alliance Donald Trump President Xi

Underpinning the dispute is Trump's anger at America's $376 billion deficit in goods trade with China.

Trump has for years slammed what he describes as Beijing's underhand economic treatment of the United States, with the USA trade deficit in goods with China ballooning to a record US$375.2 billion last year.

China implemented retaliatory tariffs on some imports from the U.S. Friday, state media reported, immediately after new U.S. duties had taken effect.

The Commerce Ministry said Trump "ignited the biggest trade war in economic history". It said they would damage the global economy unless other countries stop them.

"The US has said that it is prepared to put traffis on hundreds of billions of dollars of more goods and China has said it will match that", he added.

After months of speculation as to whether or not it would occur, the trade war between the United States and China is now underway in earnest. "After the U.S. activated its tariff measures against China, China's measures against the United States took effect immediately", Lu Kang said, though he did not elaborate on the details of the measures.

"Clearly the first salvos have been exchanged and in that sense, the trade war has started. A trade war is the last thing we want to see, because we said many times that no one will benefit from a trade war", said Lu.

Financial markets seemed to take the latest developments in stride.

The Chinese currency, the yuan, has dropped 3.5 percent against the US dollar over the past month, giving Chinese companies a price edge over their USA competition.

China said it plans to inform the World Trade Organization about the "situation" and work with other countries to defend the multilateral system of free trade, the ministry said.

He said the companies could eat the cost for consumers, but that could lead to less jobs. An analysis of over four dozen targeted U.S. products showed that prices were little changed on Friday afternoon from earlier in the week.

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"I've seen anywhere between $3,000 to $5,000 per automobile and overall higher prices", Nash said.

Some Chinese ports had delayed clearing goods from the United States, four sources said on Friday.

Carmaker BMW said it could not absorb all of the 25% tariff on the cars it exports to China from a plant in Spartanburg, South Carolina and would have to raise prices.

The Trump administration engaged in a similar tit-for-tat last month with the European Union, Mexico and Canada.

A statement from the Chinese Commerce Ministry denounced United States actions as "a violation of world trade rules" and warned that the current dispute between both countries was launching the "biggest trade war in history".

The paper holds that the tariffs will affect several US sectors, including technology (which Trump says he's trying to protect) while hitting multinational supply chains and firms, as well as harming foreign investment in Chinese firms by allies such as Japan, South Korea, and European Union countries.

Another $16 billion are expected to go into effect in two weeks and potentially another $500 billion, Trump told reporters aboard Air Force One on his way to Montana before the tariffs kicked in.

"Its unruliness looks set to have a profoundly damaging impact on the global economic landscape in the coming decades, unless countries stand together to oppose it".

China implemented retaliatory tariffs on USA goods just after noon on Friday, immediately after the US began collecting additional tariffs on Chinese imports, the official Xinhua News Agency reported, citing an unnamed spokesperson from China's General Administration of Customs.

The government-run English language China Daily newspaper said: "The Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China".

"This is not economic Armageddon. There is no obvious end to this", said Louis Kuijs, chief Asia economist at Oxford Economics.

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