China 'counterattack' expected after U.S. tariffs take effect

Europe rejects China’s offer of alliance in trade war with United States

China has sought the moral high ground during the increasingly bitter build up to the trade war by positioning itself as a champion of free trade but state media has now ramped up the rhetoric against the US President. US stocks are up slightly more than 2 percent this year as investors have weighed the threat of trade frictions against the strong performance of the USA economy.

"Increased tensions in the US-China economic relationship will negatively impact ... operations in China", William Zarit, chairman of the American Chamber of Commerce in China, said in a statement Friday.

Trump ran for the White House on a vow to reverse decades of US policy by scrapping deals that he said put American manufacturers at a competitive disadvantage and by forcing USA trading partners to shrink their trade surpluses with the United States.

That's an unusual move for this time of the year, when China usually starts booking USA supply in the months before the North American harvest starts.

Behind the trade war, there is conflict within the Trump administration.

China though has indicated that even if it has the lighter hand in imposing reciprocal punitive tariffs, it will not be bullied into buying American goods it does not need.

The company said it had already moved some production to the U.S. and Mexico and would likely move more. It opened markets for USA farmers but led some American automakers to shift production to low-wage Mexico and to then ship cars back to the United States duty-free.

How did we get here?

But Asian financial markets took Friday's developments in stride.

Ongoing trade tensions have weighed on the Chinese stock market, and led to a weakening of the yuan against the greenback.

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"The $50-billion trade war will slow down China's GDP growth by 0.2 percentage points", Ma told Xinhua, China's official news agency. He added that for now, "He's called the bluff of other countries that have basically been abusing. our workers for a long time".

In contrast, China imports only about $125 billion worth of goods from the US. The products, all sold on Chinese e-commerce platforms, ranged from pet food to mixed nuts and whiskey.

Ministry spokesman Gao Feng told reporters Thursday that China will not back down to threats.

Gao said China would not bow to threats or blackmail and would have to fight back if the United States went ahead and imposed the tariffs.

Trump is also sparring with the European Union over his threat to tax auto imports and with Canada and Mexico over his push to rewrite the North American trade pact.

In April, the White House instructed the United States Trade Representative to consider $100 billion in additional tariffs against China.

In the past, the USA used its economic clout to win trade skirmishes with developing countries, said James Boughton, a senior fellow at the Centre for International Governance Innovation in Waterloo, Ontario.

The United States imposed the first duties on $34 billion in Chinese goods early Friday, officially launching a trade war between the world's two largest economies.

Adding to concerns this week was a leaked report suggesting Trump had asked his officials to look at pulling the U.S. out of the World Trade Organisation (WTO) altogether.

In the first round though, the additional Chinese duties on U.S. goods will have a significant impact on some items, risking lower sales. The Peterson Institute for International Economics shows that nearly two-thirds of USA imports from China come from companies with foreign capital, another avenue through which United States tariffs targeted at China have an impact beyond its borders.

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