CARTOON: China and US Bare Trade War Teeth

CARTOON: China and US Bare Trade War Teeth

What you need to know

An escalating trade war benefits threatens to undermine the stability of the global economy.

The Trump administration rolled out the latest measures in an escalating trade war on April 3, 2018, subjecting some US$50 billion worth of Chinese goods with tariffs worth about US$12.5 billion and ratcheting up a conflict that could shatter a fragile global economic recovery.

Following an investigation, the U.S. Trade Representative (USTR) said it found the practices of China's government related to technology transfer, intellectual property, and innovation to be discriminatory.

"The Chinese government uses a variety of tools, including opaque and discretionary administrative approval processes, joint venture requirements, foreign equity limitations, procurements, and other mechanisms to regulate or intervene in U.S. companies' operations in China, in order to require or pressure the transfer of technologies and intellectual property to Chinese companies," the office of the USTR said in a notice detailing the goods that would fall under the latest round of trade sanctions.

The report, issued on the back of Trump's disquiet over China's record high trade surplus with the U.S., also accused China of stealing trade secrets via industrial espionage and cyber theft.

China's ambassador to the U.S. Cui Tiankai said that Beijing was already preparing countermeasures of similar scale in a conflict that has global markets rattled at the prospect of a trade war that could undermine the economic stability of the world's two largest economies.

The latest tit-for-tat measures represent round two of a fight that began when Trump slapped tariffs of 25 percent on imports of steel, and of 10 percent on overseas aluminum – measures firmly aimed at countering China's longstanding practice of dumping excess production on global markets at knockdown prices. Talks have since seen other exporters of steel to the U.S., including Canada, Mexico and the European Union, receive exemptions on the levies.

China responded Monday by imposing tariffs of up to 25 percent on 128 U.S. products, including pork, fruit, wine and seamless steel pipes.

Talks are ongoing between the two sides to prevent the disagreement deepening, though China retains the option to respond to the latest U.S. measures with tariffs on U.S. exports including soybeans, autos and aircraft parts.

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Editor: David Green