China hits back with tariffs, accusing the US of launching the 'largest trade war in history'

China implemented retaliatory tariffs on some imports from the U.S. on Friday, immediately after new U.S. duties had taken effect.
The move signals the start of a full-blown trade war between the world’s two largest economies, after President Donald Trump’s administration had initially made good on threats to impose steep tariffs on Chinese goods.
At midnight Washington time, the U.S. imposed new tariffs on $34 billion of annual imports from China. This prompted Beijing to respond in kind with levy tariffs on U.S. imports, China's foreign ministry said Friday. It did not provide any immediate details on the implementation or scale of these charges.
A spokesperson at China’s Ministry of Commerce said Friday that while the Asian giant had refused to "fire the first shot," it was being forced to respond after the U.S. had "launched the largest trade war in economic history."
“This act is typical trade bullying,” the spokesperson said, before adding: “It seriously jeopardizes the global industrial chain … Hinders the pace of global economic recovery, triggers global market turmoil and will affect more innocent multinational companies, general companies and consumers.”
China's Ministry of Commerce also said it would look to report the U.S. to the World Trade Organization (WTO) on Friday, accusing Washington of breaching international trade laws.

Market confusion

China's soymeal futures plunged over 2 percent during Friday afternoon trade in Asia before recovering most of its losses, amid market confusion over whether Beijing had actually implemented tariffs on soybeans and other U.S. goods.
The China Daily, the country's state-run English language newspaper, initially reported China had taken countermeasures against the U.S. on Friday, before rescinding its story without an explanation.
Meanwhile, the absence of an official statement specifically clarifying China's response to U.S. tariffs also did little to alleviate a sense of ambiguity among market participants.
The prospect of a tit-for-tat trade war is widely expected to make soymeal more expensive, supporting soymeal futures, particularly over the coming months when the U.S. is projected to become China's primary soybean supplier.

How did we get here?

The Trump administration initiated the dispute in April, announcing the tariffs and accusing China of using "unfair" tactics to build a large trade surplus with the U.S. and expropriating American technology.
The White House has also pressed Congress to tighten rules on Chinese investment in U.S. technology.
Nonetheless, despite the urging of business groups and lawmakers to negotiate a truce, there was little sign Friday that the two sides would reach a compromise anytime soon.
Beijing and Washington have held several rounds of high-level talks since early May, but the Trump administration has since said it is considering expanding the list of targeted Chinese imports. Trump said Thursday that another $16 billion of tariffs are expected to go into effect in two weeks, before ratcheting up the stakes to warn that measures totaling $500 billion in Chinese goods could soon come into force.
External observers have widely criticized this approach, saying such protectionist rhetoric undermines free trade policies that have shaped the global exchange of goods in recent decades.Fitch Ratings warned on Tuesday that increased trade tensions have raised the risk that new measures may be taken that would have a much greater impact on global economic growth than those enacted so far — to the tune of halting $2 trillion in global trade flow.
It’s a horrifying scenario, and one that Fitch warns could come about if the U.S. imposes auto tariffs on China, the European Union, Mexico and Canada, prompting them to retaliate in kind, as they have done over steel and aluminum tariffs.
The Trump administration tariffs on up to $50 billion on Chinese products and Chinese tariffs on $34 billion of U.S. goods are expected to kick in on Friday.
U.S. President Donald Trump also recently issued a threat of an additional $200 billion in tariffs on Chinese imports. That could prompt China to apply tariffs to all imports of goods and services from the U.S., which were worth $188 billion last year. 

Whether this scenario will play out or not depends on how much of Washington’s threats are bluster for more leverage — and not even Trump would appear to know that because this is all going down on the fly.
Late last month, Trump started waging a war on the auto industry, threatening a 25 percent tax on automobiles imported into the U.S. from Mexico and Canada, and a 20 percent tax on all European cars coming in.

He has directed the Department of Commerce to begin an investigation into imported autos under Section 232 of the Trade Expansion Act, which could result in a tariff of up to 25 percent. Section 232 is designed to give the president power to restrict imports of goods if there is a compelling national security reason.
U.S. imports of new cars and car parts that were worth $322 billion last year. 
Even the U.S. Chamber of Commerce is launching a campaign to oppose Trump’s tariff policies, and it’s a lobbying behemoth that could possibly step in to save the day. “If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war,” said Thomas J. Donohue, the president of the U.S. Chamber of Commerce.
President Trump himself also believes that auto trade war may be even bigger than the one over steel and aluminum.
“I’m going to tax their cars coming into America and that’s the big one. You know, the cars are the big one. We can talk steel, we can talk everything: The big thing is the cars,” Trump recently stated.
The European Union said that if tariffs on auto imports are implemented it could lead to  retaliation against some $300 billion in U.S. goods, thus fulfilling Fitch’s prophecy.
Automakers like Toyota and General Motors said any tariffs would significantly increase the price of cars sold in the US and depress sales and that entire North American industry could be irrevocably harmed.
Industry experts and automakers warned that Trump tariffs could add up to $5,000 to price of new vehicle in U.S. Even US made cars, which use a significant percentage of imported parts, would have higher sticker prices.
Aside from trillions in global trade, Fitch expects a “shock” of 35-40 percent on U.S. import prices and about 0.5 percentage point negative impact on U.S.’s gross domestic product growth.
Trump doesn’t care if the auto industry is miffed, but the Chamber of Commerce certainly does, and will heed Fitch’s warnings. It’s launched a major campaign backed by more than 3 million American businesses.