Trade fight could slow United States growth, economists say

President Donald Trump and China's President Xi Jinping arrive for a state dinner in Beijing last year

"I think people still don't think we'll blow up into a full global trade war that'll cause a recession".

USA companies, from Caterpillar to Qualcomm, would likely face obstruction from regulators in China, a market they rely on for an outsize share of sales.

"This all shows how quickly trade tensions could escalate between the U.S. and China", said Derek Halpenny, European head of global markets research at MUFG Bank.

Economists are starting to warn that the tit-for-tat tariff threats between the United States and China, should they all be implemented, would meaningfully slow USA growth.

Neither the $200 billion tariff plan announced by Trump earlier this week nor the $50 billion tariffs slapped on USA goods by China last week have mentioned Apple or the iPhone.

Trump is now threatening a 10 percent tariff on another $200 billion in goods. But the rhetoric is intensifying, with Trump lashing out at Beijing over its threat to retaliate against the administration's latest proposed tariffs.

Trump expressed hope about resolving the ongoing dispute, but pledged: "Canada is not going to take advantage of the United States any longer".

"China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology", Trump said in the statement.

US stock markets are opening sharply lower Tuesday as tensions over trade between the USA and China seem closer to a boil.

Big industrial companies and chemical makers are hard hit. Boeing's stock shed 3.6 percent, Caterpillar 3.7 percent and GE 1.7 percent.




"Such practice of imposing extreme pressure and blackmailing is contrary to the consensus the two sides have reached through rounds of consultations, and disappoints the global community", a Ministry of Commerce spokesperson said.

Lu Zhengwei, chief economist at Industrial Bank in Shanghai, said the Chinese countermeasures would eventually eat into U.S.jobs, but China would feel little impact from the tariffs against its exports.

"The on-again off-again possible global trade war is looking to be back on again as the USA and China announced tariffs on each other's imports", said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.

He added he would identify an extra $200 billion of goods - for a possible total of $450 billion, or most Chinese imports - "if China increases its tariffs yet again".

Washington rescinded a ban on sales of US technology to ZTE after the company agreed to pay a $1 billion fine and hire American-picked compliance managers.

Economists have said the impact on the USA economy would be muted. Oxford Economics estimates that if Trump imposed the $200 billion in duties and China responded in kind, USA growth could slow by 0.3 percentage point next year. American officials said they would suspend threatened tariff increases on up to $150 billion of Chinese goods.

Even if the amount subject to tariffs is raised to USD150bn, our rough calculations suggest it would not reduce global GDP by more than 0.2%. Those tariffs won't take effect until July 6, which leaves the countries more time to negotiate. The White House is finalizing a list of $16 billion in additional goods it will sanction later. With Canada, Mexico, the European Union and China all promising retaliatory measures at the same time, America's retailers, farmers, autoworkers and American employees throughout the global value chain are at risk. "They scuff them up, they make them. look old", Trump continued. "It's starting to feel more like a true trade war".

Navarro also disputes any notion that the trade standoff would damage the broader relationship with China.

Wall Street has viewed the escalating trade tensions with wariness, fearful they could strangle the economic growth achieved during Mr Trump's watch. Gary Cohn, Trump's former top economic adviser, said last week that a "tariff battle" could result in price inflation and consumer debt - "historic ingredients for an economic slowdown".

International Monetary Fund Managing Director Christine Lagarde has warned world leaders to "steer clear of protectionism in all its forms", following weeks of tension between the United States and China over trade.

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