USA tariffs on Chinese imports take effect

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At the stroke of midnight Washington time, the USA pulled the trigger on 25% duties on $34 billion in Chinese machinery, electronics and hi-tech equipment, including autos, computer hard drives and LEDs.

Chinese President Xi Jinping (left) and US President Donald Trump in Florida past year.

The first round of these tariffs were due to take affect at 4pm NZT. "We are the casualty and predicted it from day one".

The rapid tit-for-tat follows weeks of anxious anticipation over the "trade remedies" President Trump vowed last month to implement.

The Trump administration has contended that China has deployed predatory tactics in a push to overtake USA technological dominance, including cybertheft and requiring U.S. companies to hand over technology in exchange for access to China's market. U.S. stocks rose and the dollar extended losses.

In addition to Friday's tariffs and in response to China's retaliation in June, Mr Trump has ordered tariffs on $200bn worth of imports and threatened tariffs on another $200bn. Part of his plan is to radically change how United States trade deals work and to focus on protecting the domestic economy.

The start of the trade war likely confirms the widening rupture between Trump and his own Republican Party, a traditional champion of free trade and big business.

China rejected "threats and blackmail" ahead of a threatened USA tariff hike, striking a defiant stance Thursday in a dispute companies worry could flare into a full-blown trade war and chill the global economy.

"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".

The U.S. also has irked some of its closest allies by hiking import duties on steel, aluminum and autos from Europe, Japan, Canada and Mexico.

China says the "largest trade war in economic history" just began
Hardliners such as Peter Navarro, a trade policy adviser, says the U.S. is defending itself against an "aggressive" China. Beijing said it had no choice but to respond in kind, but was yet to outline the full extent of any retaliatory measures.

A member of China's central bank monetary policy committee, Ma Jun, said Friday that the first punches will have a "limited impact" on the Chinese economy.

In addition to the $US16b under consultation, Mr Trump has flagged there could be more tariffs in store.

In contrast, China imports only about $125 billion worth of goods from the US.

China is targeting agriculture products and mechanical parts for the energy sector, whereas the U.S. is aiming its tariffs at a large number of industrial products and resources.

What could the fallout be?

According to the statement, much of GM's efficiency and competitiveness comes from globalization, and losing its edge against its competitors can put many of its 110,000 U.S.jobs in jeopardy.

Local trade consultant Stephen Jacobi said he was hopeful that in the short term the dispute wouldn't a direct impact in New Zealand exports which (other than some steel products) were not in the firing line.

Morgan Stanley estimates that world trade could be seriously disrupted as two-thirds of goods traded are linked to global value chains. Chinese manufacturers have already been hit by a strengthening yuan that has made exports more expensive.

China also has other ways to retaliate by going after USA companies such as Apple and Walmart, which operate in its market and are keen to expand. Given that the United States buys almost four times as much from China as it sells to them, China may have to seek avenues other than trade to retaliate if the battle escalates.

China often issues warnings for Chinese travelers, usually in areas suffering from war or other problems. "In the most extreme case China could undermine the ability of the Trump administration to conclude a nuclear deal with North Korea", Peterson added.

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