China is to slap tariffs on an additional $60bn (£46bn) of imports from the United States in retaliation against $200bn of new trade sanctions on Chinese goods announced by Donald Trump.
The latest moves represent a new step towards a full-scale trade war between the world’s two biggest economies. Further escalation is deemed likely because President Trump is facing low approval ratings ahead of the United States midterm elections in November, while China will not want to be seen to back down.
President Trump announced his latest escalation of the bitter trade standoff late on Monday, promising to introduce the additional border taxes of 10% on Chinese goods from next week.
The tariffs – designed to make United States domestic products more competitive against foreign imports – apply to almost 6,000 items, including consumer goods such as luggage and electronics, housewares and food.
The United States president threatened further tariffs on an additional $276bn of goods if Beijing unveils retaliatory measures – a step that would mean tariffs on all Chinese imports to the United States and equate to 4% of world trade.
Early on Tuesday he tweeted to accuse China of “actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me”.
The United States president added: “What China does not understand is that these people are great patriots and fully understand that China has been taking advantage of the United States on trade for many years.
“They also know that I am the one that knows how to stop it. There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!”
However, China then unveiled $60bn of tariffs on US imports including aircraft and coffee.
Ahead of China’s latest move, Jack Ma, the founder of e-commerce giant Alibaba and one of the country’s wealthiest men, warned the conflict could drag on for 20 years and would be a “mess” for all parties.
China faces difficulty in responding on a scale equal to President Trump’s new tariffs because its annual imports from the United States total only about $130bn, while its exports to the United States total more than $500bn.
However, analysts said the Chinese government had a comprehensive toolbox of alternative measures it could deploy to disrupt United States businesses operating in China – and might even devalue its currency to offset the impact of the tariffs.
Erik Britton of research firm Fathom Consulting said he believed China was eventually likely to capitulate and would enter fresh talks to end the threat of tariffs as a result of the trade imbalance.
“Our likeliest outcome is that China yields. They’ve been in a game of chicken – only the United States is driving a 40-tonne truck and China is driving a Fiat Cinquecento.”
Britton added that President Trump was probably using the threat of tariffs to force Beijing to change its economic policies covering United States companies.
“The point is they [the United States] want something to change,” he said. “When I threaten my kids with stopping their pocket money it’s not that I want to raise money. It’s that I want them to tidy their room.”
President Trump has argued Beijing uses “unfair” trade practices such as forcing the transfer of United States firms’ intellectual property when they operate in China. Some analysts, however, said the threat of tariffs could exacerbate these actions, rather than end them.
David Chmiel, the managing director of risk consultancy Global Torchlight, said: “There could be a weaponising of regulation by Beijing. You can see a situation where they target specific United States companies.”
Economists said this could have a significant impact as many United States companies – including Nike, General Electric and Apple – have operations in China. Disruption could range from invasive health and safety checks to tougher labour controls or rules on fire standards. Mergers and acquisitions could be made more difficult, and state contracts could be withheld from United States firms.
Keith Wade, the chief economist at Schroders, said: “Very zealous enforcement of regulations could make life quite difficult for companies. America is also probably more dependent on China than the official trade figures suggest.”
United States Census Bureau figures show China sells about $375bn more to the United States than goes the other way. However, Deutsche Bank reckons taking into account direct in-country sales by United States firms in China would give a $20bn surplus in favour of the United States.