Cost of Possible US-China Trade War Becomes More Apparent

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Nikita Maslennikov, an analyst at the Institute of Contemporary Development (INSOR), told Sputnik that even as the United States and China engage in a tit-for-tat tariff exchange, it feels more like an invitation to the negotiating table rather than the beginning of an actual trade war.

China has warned that it is ready to pay any price in a possible trade war with the United States, hours after President Donald Trump threatened to impose tariffs on another US$100 billion (S$132 billion) worth of Chinese goods as trade relations continue to deteriorate.

"If the United States side disregards opposition from China and the worldwide community and insists on carrying out unilateralism and trade protectionism, the Chinese side will take them on until the end at any cost", the Commerce Ministry said in a statement.

The announcement came one day after some of Trump's advisers tried to calm markets and play down fears of a trade war between the world's two largest economies, saying that the tariff threats were the first step in a negotiation process.

Beijing has responded with a target list of 106 items imported from the United States worth a similar amount that would be hit by the same ad valorem tariff ("China retaliates for U.S. tariffs", Reuters, April 4).

The moves follow U.S. tariffs that were imposed earlier this year on Chinese steel and aluminum, which also prompted retaliatory measures from China.

"This is no longer a hypothetical, and a 25 percent tariff on USA soybeans into China will have a devastating effect on every soybean farmer in America", said American Soybean Association President John Heisdorffer, quoted by The Washington Examiner.

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That is doubly true in a potential trade war with China, for several reasons.

Given that a trade war with such a major trading partner is without precedent in modern times, we don't really know what it would look like. Global stock markets were unhappy with the turn of events as Wall Street dropped more than 2%, following European and Asian markets lower.

National Retail Federation President and chief executive Matthew Shay said Mr Trump should "stop playing a game of chicken with the United States economy". "We now have a trade deficit of 500 billion Dollars per year, and the theft of intellectual property for another 300 billion USD". It must be remembered that no one wins in a trade war.

China also urged the European Union to join it in taking a clear stance against U.S. protectionism, calling for Brussels and Beijing to "jointly preserve the rules-based multilateral trade order", said Zhang Ming, head of the Chinese mission to the EU. U.S. carmakers and aircraft companies are the most affected sectors as both of which are at the center of China's tariff plans.

Mr Gao was speaking shortly after Mr Trump defended his proposed tariffs on USA radio, saying the move might cause "a little pain" but the USA will be better off in the long run. In a double whammy to U.S. industry, our own government is threatening to impose 25 percent tariffs on a range of industrial goods and machinery imported from China. In a speech at the Economic Club of Chicago on Friday, Fed chair Jerome Powell said it was "too early to say" what the result of a trade war would be on the USA economic outlook. "If we can get those issues resolved positively, there's no damage to the American economy, it's all pluses".

He also said no negotiations were likely in the current circumstances.

"Raw material prices, already on an uptrend since mid-2017, will likely be pushed up further as hoarding and speculation take place in anticipation and reaction to tariffs", he added.