World

China, US slap on tit-for-tat duties

By AAP Newswire

The US and China have slapped tit-for-tat duties on $US34 billion ($A46 billion) worth of the other's imports, with Beijing accusing Washington of starting the "largest-scale trade war".

Hours before Washington's deadline for the tariffs to take effect, US President Donald Trump upped the ante, warning that the US may ultimately target over $US500 billion worth of Chinese goods, or roughly the total amount of US imports from China last year.

China's commerce ministry, in a statement shortly after the US deadline passed on Friday, said it was forced to retaliate, meaning imported US goods including cars, soybeans, and lobsters also faced 25 per cent tariffs.

China's soymeal futures fell more than 2 per cent on Friday afternoon before recovering most of those losses, amid initial market confusion over whether Beijing had actually implemented the tariffs, which it later confirmed it had.

Friday's long-expected tariff volley fuelled fear that a prolonged and escalating battle would deal a blow to global trade, investment and growth, while also damaging US farmers who stand to lose revenues and potentially driving up food prices in China.

The dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal in recent weeks.

Chinese shares, battered in the run-up to the tariff deadline, reversed earlier losses to close higher, but the yuan remained weaker against the dollar. Asian equities wobbled but also managed to end up.

Importers of American retail goods hit by higher Chinese duties were reluctant to pass the costs on to consumers for now.

Ford Motor Co said on Thursday that for now, it will not hike prices of imported Ford and higher-margin luxury Lincoln models in China.

While Chinese state media have slammed Trump's trade policies and on Friday likened his administration to a "gang of hoodlums," the simmering conflict has gained little traction on China's tightly controlled social media, not cracking the 50 top-searched topics on the Twitter-like Weibo platform.

China's commerce ministry called the US actions "a violation of world trade rules" and said that it had "initiated the largest-scale trade war in economic history."

Trump has railed against Beijing for intellectual property theft and barriers to entry for US businesses and a $US375 billion US trade deficit with China.

A China central bank adviser said the planned US import tariffs on $US50 billion worth of Chinese goods - $US34 billion plus a planned follow-on list worth $US16 billion - will cut China's economic growth by 0.2 percentage points, the official Xinhua news agency reported.

China's tariff list is heavy on agricultural goods such as soybeans, sorghum and cotton, threatening US farmers in states that backed Trump in the 2016 US election, such as Texas and Iowa.

"This is not economic Armageddon. We will not have to hunt our food with pointy sticks," Rob Carnell, chief Asia economist at ING, said in a note.

"But it is applying the brakes to a global economy that has less durable momentum than appears to be the case."