China's stocks clawed back earlier losses on Friday but lengthened a string of weekly declines as Washington's tariffs on Chinese goods took effect, escalating the trade row between the world's two largest economies.
China's commerce ministry, in a statement shortly after the USA deadline passed at 0401 GMT on Friday, said it was forced to retaliate, meaning imported U.S. goods including cars, soybeans, and lobsters also faced 25 per cent tariffs.
US President Trump held back few punches during the quarter, calling countries to account for the US being taken advantage of via worldwide trade policies, a perspective and position he committed to during his campaign. Beijing immediately reacted to the measure by slapping higher tariffs on predominantly agricultural products from the US in a bid to harm US President Donald Trump's voters in rural areas. Soybean futures have fallen from $10.42 a bushel in late May to $8.95 Friday, a drop of 14 percent.
Trump has threatened to progressively ratchet up USA penalties to a total of $450 billion in goods - which would represent the lion's share of all of China's exports to the United States.
A ministry statement said, "the Chinese side promised not to fire the first shot, but to defend the core interests of the country and people, it is forced to make a necessary counterattack".
"The market will pay attention to any follow up, whether Trump escalates further, or anything unexpected happens".
Economists have for months warned of the potential damage to the USA and global economies from aggressive trade policies that evolve into protectionism, which would raise prices and upend global supply chains.
But beyond those specifically targeted effects, consumers nearly always feel some pain.
In theory, some European companies could benefit, jumping into market niches if Chinese businesses are kept out of the USA market. And by reducing competitive pressure, they give USA producers leeway to raise their prices, too. BMW says its exports reduced the USA trade deficit by around $1 billion. They range from robots, to aircraft parts, to automobiles.
But eventually those costs will take their toll on the average wallet, and it likely won't be simply because of these tariffs.
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The president of Germany's foreign trade group BGA, Holger Bingmann, told the German regional newspaper Rhein-Neckar-Zeitung that China was already moving in the right direction.
One study said as many as 400,000 jobs could be lost. "For example, they can quarantine [U.S.] products for a long time".
The markets are clearly signalling that they expect sanity to prevail but that could change quickly.
He explains that he has already seen the effects in the pork industry. "But what's happened increasingly, is suddenly it became much, much more hard for pork to clear customs and that becomes very expensive - especially with a perishable product, which can spoil in the port if its not kept in the right refrigeration condition". China could possibly take this opportunity to strengthen trade deals with other countries, shutting out trade that would have otherwise occurred between the U.S. and those countries.
But with the two countries now in the midst of a trade war, China could very turn to a country like Iran to feed its oil demand. "Perhaps the Trump administration can only clear its mind after a fight".
Beijing had previously said that it would enact retaliatory duties of 25 per cent on the same amount of USA products as the Chinese goods affected by U.S. tariffs. The EU, Canada and Mexico were surprisingly excluded from the exemption list due to "national security" risks; this action was a major talking point at the G7 meeting, held in Canada during the quarter, a meeting that saw all countries against the U.S. on trade policy. The company said in a Securities and Exchange commission filing that the tariffs "would have an immediate and lasting detrimental impact to its business in the region".
The retaliatory tariffs from China will fall especially hard affecting more than 25% of a county's economy-in almost 20% of the counties that voted for President Donald Trump in 2016, affecting eight million people mostly in agricultural, manufacturing and technology sectors, The Wall Street Journal reported.
That would bring the total of targeted Chinese goods to potentially $550 billion - more than the $506 billion in goods that China shipped to the United States past year.
Still, the Trump administration sees the negative impacts as short-term "hiccups" on the path to more permanent solutions.