How the US-China trade war could play out

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The Chinese government on Friday hit back with tariffs on U.S. goods, hours after President Donald Trump's announcement that the United States would hit $50 billion worth of Chinese goods with a 25% tariff.

The world's two largest economies have been sparring over trade in recent months, sparking global fears of an all-out trade war.

China has noticed the USA statement which said Washington would continue to impose additional tariffs if China takes retaliatory measures.

China said it would introduce measures of the "same scale and the same strength" immediately.

A spokesperson from China's Ministry of Commerce said the USA has "ignited a trade war".

The statement also said China was not going forward with deals to buy more American goods.

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China's Commerce Ministry said on Friday that it would "immediately introduce taxation measures of the same scale and the same strength" after the USA revised its initial list of tariffs on Chinese imports, adding several technology products.

Paulsen said he was thankful the White House had spared some Chinese products used in American-made medical devices, including in Minnesota. It said Beijing also was scrapping agreements to narrow its multibillion-dollar trade surplus with the United States by purchasing more American farm goods, natural gas and other products. Beijing has drawn up a list of $50 billion in US products that would face retaliatory tariffs.

China said it would retaliate with $US50 billion in tariffs in response, rattling financial markets.

The Chinese government has already promised retaliation in equal measure against US goods including soybeans and imports of four-wheel drive vehicles.

In March, the Trump administration imposed tariffs on imports of steel and aluminum from Russia, China, and India.

Trump has made a number of tariff-related threats.

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Some companies that source materials from China could eventually look for suppliers in other Asian countries with low labor costs including Vietnam, the Philippines and Bangladesh, but many will take a wait-and-see approach because it takes times to rewire supply chains, said Erik Lundh, an economist specializing in China for The Conference Board, a major business group. "In addition, they will serve as an initial step toward bringing balance to the trade relationship between the United States and China". It said last September that it expects China to spend almost $1.1 trillion over the next 20 years buying more than 7,200 new airplanes.

China's response, released in detail early Saturday, now raises the prospect the USA will impose more duties following a pledge from Trump on Friday.

His complaint is that China imposes significantly higher tariffs on the USA than the US imposes on China.

The announcement came in response to Trump's increase in tariffs on Chinese imports in America.

The immediate impact of tariffs on US growth is expected to be relatively small, but economists warn a prolonged trade war could damage business investment and consumer confidence.

U.S. officials have said Beijing has sought industrial dominance in emerging technologies through the theft of American know-how through forced technology transfers, hacking and other forms industrial espionage.

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"We grow more than we can use [domestically]", said Blue Earth County corn and soybean farmer Kevin Paap, president of the Minnesota Farm Bureau. Even if the USA duties reach the full $150 billion, they estimated it would shave well under a half-percentage point off China's annual growth rate, which could be offset by fiscal and monetary policy actions.

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