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As Trump’s trade war starts, China vows retaliation

On July 6, United States tariffs on $34 billion in Chinese imports took effect, firing the first shots in a trade war between the world's biggest economies. (Video: Reuters)

BEIJING — The United States imposed the first duties on $34 billion of Chinese goods early Friday, officially launching a trade war between the world’s two largest economies. Moments later, China fired back, accusing the United States of violating World Trade Organization rules and setting off “the largest trade war in economic history to date.”  

“In order to defend the core interests of the country and the interests of the people, we are forced to retaliate,” the Chinese Commerce Ministry said in a statement. 

Although the Chinese statement did not outline targets, Beijing has promised to slap levies on an equal amount of U.S. goods, including heartland staples like soybeans, corn, pork and poultry — a move President Trump said would compel the United States to hit China with levies on up to $500 billion in products.

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In the short term, analysts said, the moves may disrupt markets and hinder trade in both countries.

“For industries that are directly impacted by the tariffs, the impact will be immediate and big,” said Yanmei Xie, a China policy analyst at Gavekal Dragonomics, an economic research firm in Beijing. 

Meanwhile, Russia said Friday that it was imposing tariffs on U.S. products in response to the tariffs on steel and aluminum that Trump imposed in March. Import taxes of 25 to 40 percent will be applied to various U.S. industrial goods, including those used in the construction and energy sectors, according to Russian Minister of Economic Development Maxim Oreshkin.

The retaliation announced Friday will provide compensation of almost $88 million, far less than the nearly $538 million that Trump’s tariffs have cost Russian companies, Oreshkin said. Russia also has joined the European Union, China, India and Canada in complaining to the WTO about the U.S. action.

President Trump on June 27 again promised to fix “broken” trade deals, saying the U.S. is the “piggy bank that everybody wants to rob.” (Video: The Washington Post, Photo: Jabin Botsford/The Washington Post)

Still, Russia is not a top commercial partner for the United States. The total trade of goods between the countries last year was about $24 billion, roughly what the United States and China exchange every two weeks.

The risk of escalation — specifically Trump’s $500 billion dollar threat against China — has analysts worried. “The countdown is on as to what Trump will do next,” said Xie.

Chinese analysts said the first round would be tough but manageable, and were bracing for more to come.

“The first round’s impact is not that big, but the key is whether there will be more — a second round of revenge and retaliation and a third round,” said Shi Yinhong, a professor of international relations at Renmin University in Beijing. 

The risk of an ever-escalating U.S.-China trade war has businesses in both countries nervous. 

U.S. levies tariffs on $34 billion worth of Chinese imports

Despite frustration with Chinese trade practices, U.S. businesses have warned for months that Trump’s trade threats may do more harm than good. 

“There are no winners in a trade war,” William Zarit, chairman of the U.S. Chamber of Commerce in China, said in a statement published moments before the U.S. tariffs took effect. 

“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 U.S.-China­ economic relationship will negatively impact their operations in China,” he said.

Some U.S. companies scrambled to reach China before the tariff deadline, which was Friday at 12:01 a.m. Eastern time.

The Internet watched one cargo ship carrying a load of soybeans race to the southern peninsula port of Dalian in Liaoning province. Peak Pegasus was scheduled to reach its destination an hour after China was expected to enact a 25 percent tax on its goods, according to Bloomberg ship data.

A half-hour before the deadline in Beijing, the ship was passing South Korea’s Jeju Island — close but not quite cutting it.

Some said that Beijing’s tactics may go beyond tariffs to include arbitrary quarantines and a costly uptick in customs inspections. 

Shaun Rein, managing director at the China Market Research Group in Shanghai, said the Chinese government’s next play could be to stoke anti-American sentiments among consumers — similar to the boycotts it ordered last year on South Korea’s Lotte Group, which caused dozens of the company’s convenience stores to shutter.

“If I was Starbucks or Apple,” he said, “I would be scared right now.”

U.S. and China are on the brink of a trade war. Here’s how it got to this point.

Trump has vowed for years to tackle Chinese trade practices, accusing Beijing of stealing U.S. intellectual property and slamming the $375 billion U.S. trade deficit with the country. 

He argues that China should purchase more American goods, and has blamed trade with Beijing for the loss of American jobs throughout the Rust Belt. (Economists say globalization and the rise of automation shrank the kind of manufacturing operations that U.S. companies in recent years have shuttled abroad.)

At a rally Thursday in Montana, Trump said, again, that China is “killing us” on trade.

Chinese officials, however, are projecting studied confidence, asserting that the Asian nation is better equipped to withstand the turbulence.

“Our commodity market and job market are relatively flexible, and our foreign-related economic sectors’ ability to make flexible adjustment is more prominent,” said Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, in an interview Thursday with the Chinese financial newspaper Financial News.

The Chinese side sees Trump’s threats as an attempt to hold back its economic growth — and has vowed to match them move for move. 

 “Whether it’s through trade war or other means, the end goal is to make China subservient to the United States,” said He Weiwen, vice president of the Center for China and Globalization in Beijing. “That’s impossible. China won’t accept that,” he said, adding “what happens next depends on the United States. China will be prepared to follow suit.” 

Lynch reported from Washington. Luna Lin, Amber Ziye Wang and Yang Liu in Beijing contributed to this report.

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