US-China trade war escalates as markets take another hit

Additional US tariffs on Chinese goods came into effect on Sunday, prompting China to retaliate, sending markets lower.

    US stock futures tumbled, followed by Japan and Hong Kong markets after the US and China once again raised import taxes on one another's goods [File: Richard Drew/AP]
    US stock futures tumbled, followed by Japan and Hong Kong markets after the US and China once again raised import taxes on one another's goods [File: Richard Drew/AP]

    The United States began imposing 15 percent tariffs on more than $125bn of Chinese goods - including footwear, smart watches and flat-panel televisions - as China began imposing new duties on US crude, the latest escalation in a bruising trade war.

    Stock futures in the US, markets in Asia and oil prices fell early on Monday.

    US President Donald Trump said the sides would still meet for talks later this month.

    Trump, writing on Twitter, said his goal was to reduce US reliance on China and he again urged US companies to find alternate suppliers outside China.

    A new round of tariffs took effect from 0401 GMT on Sunday, with Beijing's levy of five percent on US crude marking the first time it had been hit since the world's two largest economies started their trade war more than a year ago.

    A variety of studies suggest the tariffs will cost US households up to $1,000 a year and the latest round will hit a significant number of US consumer goods.

    In retaliation, China started to impose additional tariffs on some of the US goods on a $75bn-target list. Beijing did not specify the value of the goods that face higher tariffs from Sunday.

    The extra tariffs of five percent and 10 percent were levied on 1,717 items of a total of 5,078 products originating from the US. Beijing will start collecting additional tariffs on the rest from December 15.

    On Monday morning, US stock futures slid 0.7 percent, setting a dour tone for Asian markets. Japan's Nikkei slid 0.28 percent in early monring trade, while Hong Kong markets were also down after another weekend of violent anti-government protests.

    However, Chinese shares recorded modest gains, with the CSI300 index rising 0.3 percent.

    Gold prices gained ground, with spot gold inching up 0.6 percent higher at 0048 GMT after having fallen to a one-week low in the previous session.

    Steve Lamar, executive vice president of the American Apparel & Footwear Association, said on Sunday the new tariffs were "just in time for our most important selling season of the year. They claim that they are hurting China but, in reality, they are hurting us. Prices will go up, sales will go down, jobs will be lost."

    He said the US "can make progress with China when we engage with them in calm, productive talks, not when we make it more expensive for Americans to get dressed every day."

    Trump on Sunday cited comments from US economist Peter Morici, who said the tariffs would not affect US consumers that much given a drop in the Chinese currency, and the president called on US companies to find suppliers outside of China.

    "We don’t want to be servants to the Chinese!" Trump said. "This is about American Freedom. Redirect the supply chain. There is no reason to buy everything from China!"

    Later, he told reporters that talks with China were continuing and the two sides would meet in person in September.

    "We are talking to China, the meeting is still on, as you know, in September," he said. "We'll see what happens, but we can't allow China to rip us off anymore as a country."

    China reacts

    Chinese state media struck a defiant note.

    "The United States should learn how to behave like a responsible global power and stop acting as a 'school bully,'" the official Xinhua news agency said.

    "As the world's only superpower, it needs to shoulder its due responsibility, and join other countries in making this world a better and more prosperous place. Only then can America become great again."

    Tariffs could not impede China's development, said the official People's Daily newspaper of the ruling Communist Party.

    "China's booming economy has made China a fertile ground for investment that foreign companies cannot ignore," it said, in a commentary under the name "Zhong Sheng", or "Voice of China", which is often used to state its view on foreign policy issues.

    Last month, Trump said he was increasing existing and planned tariffs by five percent on about $550bn worth of Chinese imports after Beijing announced its own retaliatory tariffs on US goods.

    Tariffs of 15 percent on cellphones, laptop computers, toys and clothing are to take effect on December 15.

    The US Trade Representative's Office said on Thursday it would collect public comments through September 20 on a planned tariff increase to 30 percent on a $250bn list of goods already hit with a 25 percent tariff set for October 1.

    For two years, the Trump administration has sought to pressure China to make sweeping changes to its policies on intellectual property protection, forced transfers of technology to Chinese firms, industrial subsidies and market access

    Trump has also linked the trade talks and the protests in Hong Kong, saying he believes the negotiations with the US had led Beijing to be more restrained in its response to the demonstrations in Hong Kong.

    SOURCE: News agencies