WASHINGTON (AP) – The trade war that erupted Friday between the U.S. and China carries a major risk of escalation that could weaken investment, depress spending, unsettle financial markets and slow the global economy.
The opening shots were fired just after midnight, when the Trump administration imposed a 25 percent tariff on $34 billion of imports from China, and Beijing promptly retaliated with duties on an equal amount of American products. It accused the U.S. of igniting “the biggest trade war in economic history.”
Because of this first round of hostilities, American businesses and, ultimately, consumers could end up paying more for such Chinese-made products as construction equipment and other machinery. And American suppliers of soybeans, pork and whiskey could lose their competitive edge in China.
A ship hauls containers at a container port in Qingdao in eastern China’s Shandong province Friday, July 6, 2018. The United States hiked tariffs on Chinese imports Friday and Beijing said it immediately retaliated in a dispute between the world’s two biggest economies that President Donald Trump says he is prepared to escalate. (Chinatopix via AP)
These initial tariffs are unlikely to inflict serious harm to the world’s two biggest economies. Gregory Daco, head of U.S. economics at Oxford Economics, has calculated that they would pare growth in both countries by no more than 0.2 percent through 2020.
But the conflict could soon escalate. President Donald Trump, who has boasted that winning a trade war is easy , has said he is prepared to impose tariffs on up to $550 billion in Chinese imports – a figure that exceeds the $506 billion in goods