In a move that brought the world's two largest economies to the brink of a trade war, China yesterday announced new tariffs of 25 per cent on US$50 billion (S$65.7 billion) worth of US imports.
It was a tit-for-tat response after the United States said on Tuesday that it was planning to impose similar new tariffs on a range of Chinese imports, including high-tech items such as semiconductors.
The Chinese targeted 106 US products, including soya beans, vehicles and aircraft. The list was notable for its economic and political impact.
The amount of US$50 billion made up nearly half of the US$115.6 billion worth of US goods that China imported in 2016. And soya beans are produced in farming states like Iowa that voted for President Donald Trump in 2016.
The latest move by Beijing, following the decision on Monday to impose new tariffs of 25 per cent on US$3 billion worth of US goods, including pork, fruit and wine, showed its resolve to resist the Americans to the end, said Chinese economist Hu Xingdou of the Beijing Institute of Technology.
Chinese Vice-Commerce Minister Wang Shouwen intimated as much yesterday. "China doesn't want a trade war because no one will emerge as a winner. But we are not afraid of a trade war either," he said at a press conference.
"China's consistent position is that our door to negotiation is always open. If the US wants to negotiate, we would like to negotiate with them on the basis of equality, mutual respect and mutual benefit."
However, "if anyone wants to fight a trade war, we will take them on and fight to the finish", he said.
China's latest move has led observers to believe the two sides are dangerously close to a trade war.
"I think we are very close to a trade war. It seems that China has shown its hand by announcing a tax on soya beans," said OCBC Bank economist Tommy Xie.
China needed to respond to any protectionist measures from the US, said RaboResearch senior economist Hugo Erken. "Otherwise, it would seem weak, which under the current circumstances would be unacceptable," he added.
Mr Trump yesterday, however, had his own take on developments.
He tweeted: "We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US. Now, we have a trade deficit of US$500 billion a year, with intel-lectual property theft of another US$300 billion. We cannot let this continue! When you are already US$500 billion down, you can't lose!"
Markets were spooked by the rising trade tensions between the two trading giants, with futures on the S&P 500 Index declining 1.9 per cent to the lowest in five months, Britain's FTSE 100 Index sinking 0.7 per cent to the lowest in more than a week, and the MSCI Emerging Market Index falling 1.7 per cent, its biggest drop in a week.
Singapore Business Federation (SBF) chief executive Ho Meng Kit said the latest Chinese move was not good news for its companies "as both the US and China are among our largest trading partners".
If the tit-for-tat moves continue, "they will hurt themselves and many other export-oriented eco-nomies in Asean", he added.
"We hope these are just strong negotiating postures as the US and China try to do a deal," he said, urging SBF members facing difficulties as a result of the trade dispute to contact the federation.
The Chinese said the effective date of the new tariffs depen-ded on when the US action took effect, which could take about two months.
The two sides will be using this time to negotiate, noted Mr Xie.
Mr Hu saw a silver lining in the worsening dispute, saying the trade spat with the US was an opportunity for China to push for economic reforms and opening up, which in turn would help it gain acceptance as a market economy.
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