World News

Shots fired as US-China tariffs take hold

By AAP Newswire

US tariffs on $US34 billion ($A46 billion) in Chinese imports have taken effect, with Beijing vowing to respond immediately in kind as the world's two biggest economies took a high-stakes turn towards all-out trade conflict.

China's commerce ministry said shortly after the deadline passed on Friday that it was forced to retaliate, meaning $US34 billion worth of imported US goods including vehicles and agricultural products also face 25 per cent tariffs.

"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 ministry said in a statement.

It called the US actions "a violation of world trade rules" and said that it had "initiated the largest-scale trade war in economic history."

On Thursday, Trump warned that the US may ultimately target over $US500 billion worth of Chinese goods, or roughly the total amount that the US imported from China last year.

Trump has railed against Beijing for intellectual property theft and barriers to entry for US businesses and a $US375 billion US trade deficit with China.

Throughout the escalating conflict, China has sought to take the high road, positioning itself as a champion of free trade, but state media ramped up criticism of Trump on Friday.

"In effect, the Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China," the state-run China Daily newspaper said on Friday.

"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."

While the initial volley of tariffs was not expected to have major immediate economic impact, the fear is that a prolonged battle would disrupt makers and importers of affected goods in a blow to global trade, investment and growth.

On Thursday, Ford Motor Co said that for now, it will not hike prices of imported Ford and higher-margin luxury Lincoln models in China.

A China central bank adviser said the planned US import tariffs on $US50 billion worth of Chinese goods - $US34 billion plus a planned follow-on list worth $US16 billion - will cut China's economic growth by 0.2 percentage points, although the overall impact would be limited, the official Xinhua news agency reported Friday.

"This is not economic Armageddon. We will not have to hunt our food with pointy sticks. But it is applying the brakes to a global economy that has less durable momentum than appears to be the case," Rob Carnell, chief economist at ING, said in a note to clients.

Chinese Commerce Ministry spokesman Gao Feng said on Thursday that the proposed US tariffs would hit many American and foreign companies operating in China and disrupt their supplies of components and assembly work.

China's tariffs on hundreds of US goods include top exports such as soybeans, sorghum and cotton, threatening US farmers in states that backed Trump in the 2016 US election, such as Texas and Iowa.