China Cancels U.S. Soybean Purchases as Trade War Takes Hold

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The United States imposed $34 billion in tariffs on Chinese products Friday, and Beijing hit back with its own fiscal punishment and slammed the Trump administration for igniting "the biggest trade war in economic history".

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.

China's commerce ministry, in a statement shortly after the US deadline passed at 0401 GMT on Friday, said that it was forced to retaliate, meaning imported USA goods including cars, soybeans, and lobsters also faced 25 percent tariffs.

Similarly, China is placing 25% tariffs on a host of goods including crude oil and soybeans.

While economists say the consequences of a spat between the world's two largest economies can be contained for now, there are fears that Donald Trump's stance on trade could cause serious damage to the global economy.

"Once these tariffs start going into effect, it's pretty clear the conflict is real", said Robert Holleyman, former deputy United States trade representative under President Barack Obama and now a partner at law firm Crowell and Moring LLP.

China accused the USA of launching the "largest trade war in economic history", saying it was "typical trade bullying" that could trigger "global market turmoil".

"Trade war is never a solution", Chinese Premier Li Keqiang said at a news briefing with Bulgarian Prime Minister Boyko Borissov in Sofia before a summit with 16 central and eastern European countries. The additional taxes will ripple through supply chains, forcing companies in both countries to decide whether to take a financial hit themselves or pass it along to consumers.

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In the run-up to Friday, there was no sign of renewed negotiations between USA and Chinese officials, business sources in Washington and Beijing said.

"However, we can't rule out a full-blown, recession-inducing "trade war"," it said.

The imposition of the tariffs had little impact on Asian stock markets.

Those retaliatory tariffs are slated to take effect Friday, after Trump's tariffs go into effect.

"The United States has waged the biggest trade war in economic history against the rules of the World Trade Organization", China's Commerce Ministry said in a statement, describing the us tariffs as "textbook trade hegemony". But many consumer industry groups say American consumers are likely to bear the brunt of the fight.

There are already signs within the U.S. that companies are pausing decisions on investment and hiring and input costs flowing from the earlier increase in duties on steel, aluminium and washing machines are flowing through to higher end-prices.

That could include "a wide range of products as diverse as tool sets, batteries, remote controls, flash drives and thermostats", he said, adding, "a strategy based on unilateral tariffs is the wrong approach, and it has to stop".

The Trump administration has argued that China has deployed predatory tactics in a push to overtake USA technological dominance.

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China placed levies on USA exports including soya beans and pork, hitting farmers in states that supported Mr Trump in the 2016 election.

"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. "So we have 50 plus 200 plus nearly 300", he said.

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".

The direct impact on China's economic growth in 2018 is estimated at 0.1-0.3 percentage points while the drag on its export growth is expected to be 1 percentage point.

After that, the hostilities could intensify: Trump said the U.S.is ready to target an additional $200 billion in Chinese imports - and then $300 billion more - if Beijing does not yield to USA demands and continues to retaliate.

Soybeans are America's biggest agricultural export to China, amounting to more than $12 billion of sales a year ago.

"This is not economic Armageddon".

Rob Carnell, chief Asia economist at ING, said: "This is not economic Armageddon".

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"But it is applying the brakes to a global economy that has less durable momentum than appears to be the case".

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