The United States had just imposed tariffs on $34 billion worth of Chinese goods on Friday, drawing immediate retaliatory duties from Beijing on USA imports in the first shots of a heated trade war. The US omitted some high-profile items like mobile phones.
"There is still a good six or seven weeks before these (tariffs) take effect so it is not like we are going to see these tomorrow, but it is definitely the next step in a trade war", TD Securities global strategist James Rossiter said.
Washington accuses Beijing of stealing or pressuring companies to hand over technology and worries plans for state-led development of Chinese champions in robots and other fields might erode American industrial leadership. They warned tariffs on imports raise consumer prices and expose US farmers and manufacturers to retaliation.
The USTR said the latest action was in response to Beijing's failure to change its policies and its retaliatory duties. The move has faced criticism from American officials and lawmakers. "What's next is not so much a trade war or even a cold war as the dawn of an ice age in relations between China and the United States".
'We can not turn a blind eye to China's mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy'. President Trump had warned China that if the country retaliated to those tariffs, he would impose additional ones; China did, quickly adding tariffs to more than 500 different American imports.
"American families are the ones being punished".
U.S. policy "actually interferes with the process of economic globalization" and "damages the world economic order", charged Li.
Louis Kuijs, Hong Kong-based Head of Asia Economics at Oxford Economics, said while he expects China to strongly condemn the US moves, its policy response is likely to be limited for now.
"In part because they have only limited ammunition and in part because it's still early in the process on the US side", Kuijs said.
The Trump administration intends to impose a ten percent duty on the products listed, Reuters reported, citing US Trade Representative Robert Lighthizer. A full-blown global trade war would shave 0.4 percentage point off world growth, according to Bloomberg Economics.
Trump's latest move took the wind out of investors' sails largely because the central scenario for many in the markets is that Washington will eventually step back from the escalating row and settle for some sort of compromise.
The White House has complained that China has used predatory practices in a relentless push to grant Chinese companies an unfair advantage in the industries of the future, including robotics, electric cars and biopharmaceuticals.
Instead, if Trump wants to solve the issue, he needs to "call up the Fed and tell them, 'Let interest rates find the right level, ' and we'll begin to adjust this problem over time", Stockman said.