US-China trade war: who will win?

The United States is “opening fire” on the world with its threatened tariffs, the Chinese government warned on Thursday, saying Beijing will respond the instant US measures go into effect as the two locked horns in a bitter trade war.

The Trump administration’s tariffs on US$34 billion of Chinese imports are due to go into effect at 12.01am eastern time on Friday (0401 GMT Friday), which is just after midday on Friday Beijing time.

U.S. President Donald Trump has threatened to escalate the trade conflict with tariffs on as much as $450 billion worth of Chinese goods if China retaliates, with the row roiling financial markets including stocks, currencies and the global trade of commodities from soybeans to coal.

China has said it will not “fire the first shot”, but its customs agency made clear on Thursday that Chinese tariffs on U.S. goods would take effect immediately after U.S. duties on Chinese goods kick in.

Speaking at a weekly news conference, Commerce Ministry spokesman Gao Feng warned the proposed U.S. tariffs would hit international supply chains, including foreign companies in the world’s second-largest economy.

“If the U.S. implements tariffs, they will actually be adding tariffs on companies from all countries, including Chinese and U.S. companies,” Gao said.

US measures are essentially attacking global supply and value chains. To put it simply, the US is opening fire on the entire world, including itself,” he said.

“China will not bow down in the face of threats and blackmail and will not falter from its determination to defend free trade and the multilateral system.”

Asked whether US companies will be targeted with “qualitative measures” in China in a trade war, Mr Gao said the government will protect the legal rights of all foreign companies in the country.

“We will continue to assess the potential impact of the US-initiated trade war on companies and will help companies mitigate possible shocks.”

Mr Gao said China’s foreign trade is expected to continue on a stable path in the second half, though investors fear a full-blown Sino-US trade dispute will deal a body blow to Chinese exports and its economy.

Foreign companies accounted for US$20 billion, or 59 per cent, of the US$34 billion of exports from China that will be subject to new tariffs from the US starting from Friday, with US firms accounting for a significant part of that 59 per cent, Mr Gao added.

The World Trade Organization warned on Wednesday that trade barriers being erected by major economies could jeopardise the global economic recovery, with their effects already starting to show.

An outright trade war with the United States could hit China’s export machine, with recent data pointing to fatigue as credit expansion slowed and domestic demand looked to be softening.

China’s second-quarter economic growth is expected to have slowed slightly from the previous quarter, a Reuters poll showed, as policymakers seek to mitigate the impact from a de-risking drive and the trade dispute with the United States.