U.S. and China slap big tariffs on each other, escalating trade fight
SHANGHAI – The hefty tariffs that the United States and China slapped on each other’s exports Friday intensified a trade battle that has a strong risk of escalating or dragging on, chilling confidence, roiling financial markets and potentially seriously harming the broader economy.
There was no indication of new talks between the two sides as tens of billions of dollars of new taxes on trade took effect. The U.S. agricultural sector has a particularly large stake at risk.
After President Donald Trump followed through on his threat to apply 25 percent levies on $34 billion of Chinese products, mostly machinery and industrial parts, Beijing accused the United States of “launching the largest trade war in economic history,” and fired back with dollar-for-dollar tariffs mainly on American farm products and other foods.
Soybeans topped the list – and illustrate how deeply U.S. and Chinese producers and consumers have come to depend on each other.
Some ships from the Pacific Northwest bound for China with tons of soybeans have already been rerouted to Europe or Southeast Asia, analysts here said. Chinese officials, meanwhile, have been pulling out all the stops to encourage domestic farmers to plant more soybeans, so far with mixed results.
“China needs soybeans, and the U.S. needs the Chinese market,” said Jiang Boheng, an analyst with Luzheng Futures Co. in eastern China’s Shandong province. “It’s a loselose situation.”
On the whole, the tariffs and retaliatory tariffs amount to penalties totaling $17 billion, a tiny amount given the size of the two economies, which have a combined gross domestic product of roughly $30 trillion.
Nonetheless, the duties will hurt sales and disrupt supply chains for some industries and businesses. More worrisome, the latest actions and the increasingly heated rhetoric from both sides have raised alarms of a drawn-out fight that could take a toll on both economies and spill over to the rest of the world.
Any fallout thus far appears to be muted as American economic growth surged in the second quarter. Job creation hasn’t dimmed. On Friday the government said the nation added a solid 213,000 jobs in June.
China’s economy is expected to expand at a still-rapid pace of about 6.8 percent this year, even as investments and production have decelerated and the government has clamped down on excessive lending.
The U.S. and China are the two largest economies in the world and have periodically had trade clashes, but Trump and hard-liners in his administration are insisting that Beijing pay for years of what they see as unfairly taking advantage of America’s open markets and know-how.
China’s tariffs are targeting agricultural and food products, including grains, tobacco and whiskey, products largely from states that backed Trump and home to influential GOP lawmakers. The U.S. duties are aimed at hitting China’s supply chain and intermediate parts supporting the country’s high-tech manufacturing.
U.S. businesses and congressional Republicans have increasingly urged Trump to back away from applying broad-based tariffs, calling instead for negotiations and enlisting the help of other trading partners to put pressure on Beijing.
Trump, however, has alienated