USA tariffs take effect, China warns of 'counterattack'

A US flag is seen during a welcoming ceremony in Beijing China

"China promised to not fire the first shot, but to defend national core interests and the interests of the people it has no choice but to strike back as necessary", the Commerce Ministry said in a statement.

A trade deficit is where a country's imports exceed its exports.

That would bring the total of targeted Chinese goods to potentially $550 billion - more than the $506 billion in goods that China actually shipped to the United States past year.

The conflict between the world's two biggest economies reflects chronic tension in their relationship as customers, business partners and increasingly as competitors.

There are already signs within the USA 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.

The Asian giant is already expected to cancel American soybean imports due to the 25% tariff on the legume and, according to Bloomberg, has already purchased 19 cargoes from Brazil.

The big question is how far the hostilities between Washington and Beijing will go.

US President Donald Trump has warned that the United States may ultimately target over US$500 billion worth of Chinese goods, an amount that roughly matches its total imports from China a year ago. It said they would damage the global economy unless other countries stop them.

But Trump has said his administration will respond to retaliation from Beijing with much bigger waves of tariffs, raising the prospect of worsening tit-for-tat reprisals.

The president upped the stakes on Thursday, saying the amount of goods subject to tariffs could rise to more than $500bn.

Dominic Raab replaces David Davis as new Brexit secretary
British Brexit Secretary David Davis has resigned from Government, effective immediately, United Kingdom media reports say. Denying that he wanted to unseat the prime minister, he said he would now "argue for being as firm as possible".

Mr Trump said: "You have another 16 [billion dollars] in two weeks, and then, as you know, we have $200bn in abeyance and then after the $200bn, we have $300bn in abeyance. OK?"

"We're certainly hoping that this trade dispute is temporary", said Brian Watkins, a 56-year-old farmer from Kenton, Ohio. Those threats were followed by promises from both nations to tax even more imports.

And of course past year, at the Global Economic Forum in Davos, Switzerland, Chinese President Xi Jinping offered up a rousing defense of globalization - and a (rather presumptuous) suggestion that China, rather than the United States, is the new champion of free trade.

"China will never start a trade war but if any party resorts to an increase of tariffs, then China will take measures in response to protect development interests", he said in Sofia, Bulgaria.

Chinese President Xi Jinping (left) and US President Donald Trump in Florida previous year. In a Fargo rally last week aiming to boost Heitkamp's Republican challenger, Rep. Kevin Cramer, Trump said he was seeking "fair and reciprocal" trade relations. United States tariffs on steel and aluminum imports have provoked retaliatory measures against billions of dollars of American exports. President Trump has threatened to retaliate against the Chinese retaliation. But he doesn't "see the war ending until there are casualties".

The impact of the first round of tariffs on $34 billion in Chinese goods will be "quite small", said Ethan Harris, head of global economic research at Bank of America Merrill Lynch.

Because of some poor choices by Trump trade officials, the tariffs mostly miss Chinese companies and instead target USA and other non-Chinese multinational corporations operating in China, according to an analysis from the Peterson Institute for International Economics. On the other hand, it is expanding restrictions on investments.

'There are no winners in a trade war, ' said the chamber's chairman, William Zarit, in a statement.

The head of the Asia-Pacific Committee of German Business (APA), Hubert Lienhard, said that in the face of a growing protectionist agenda in the United States, a joint German-Chinese message to the White House "could be one the of things emerging from today's government consultations".

But reaching a deal that's palatable to both sides will be tough.

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