U.S.-China trade war could drive prices up and growth down

The world’s two biggest economies fired the opening shots Friday in a trade war that could have wide-ranging consequences for consumers, workers, companies, investors and political leaders.

The United States slapped a 25 percent tax on $34 billion worth of Chinese imports, and China is retaliating with taxes on an equal amount of U.S. products, including soybeans, pork and electric cars.

China’s commerce ministry said Washington had “ignited the biggest trade war in economic history.”

The United States accuses China of using predatory tactics in a push to supplant American technological dominance. The tactics include forcing U.S. companies to hand over technology in exchange for access to the Chinese market, as well as outright cybertheft. President Donald Trump‘s tariffs are meant to pressure Beijing to reform its trade policies.

Though the first exchange of tariffs is unlikely to inflict much economic harm on either nation, the damage could soon escalate. Trump, who has boasted that winning a trade war will be easy, said Thursday that he’s prepared to impose tariffs on up to $550 billion in Chinese imports — a figure that exceeds the $506 billion in goods that China actually shipped to the U.S. last year.

Escalating tariffs would likely raise prices for consumers, inflate costs for companies that rely on imported parts, rattle financial markets, cause some layoffs and slow business investment as executives wait to see whether the Trump administration can reach a truce with Beijing. The damage would threaten to undo many of the economic benefits of last year’s tax cuts.

A full-fledged trade war, economists at Bank of America Merrill Lynch and elsewhere warn, risks tipping the U.S. economy into recession.

And those caught in the initial line of fire — U.S. farmers facing tariffs on their exports to China, for instance — are

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