China to impose $34bn tariffs before the United States as trade dispute escalates

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A trade war between China and the U.S. could impact smaller, global countries more severely than either of the two countries at the heart of the trade dispute.

ASIAN ANGST The ongoing angst over U.S. President Donald Trump's trade tariffs had extended the recent slide in Asian markets overnight, in particular Chinese shares which are now deep into "bear" market territory.

"The US is firing shots to the world, including to itself", spokesman Gao Feng said Thursday during a press conference.

Washington's targets for higher border taxes focus on industrial components like PC parts, fuel pumps, construction equipment and autos, according to trade data firm Panjiva.

"As China is an important supporter and participant of globalization and global supply chains, many of [China's] exports are produced by non-Chinese companies", Gao noted.

US companies had US$256 billion in investment in China by the end of past year, exceeding China's US$140 billion in the United States, according to a report by the National Committee of US-China Relations and Rhodium Group in April.

"The US's measures are essentially attacking the global supply and value chain".

A strong rise across autos boosted European shares on Thursday, as hopes over a softening in US trade rhetoric lifted the sector, though trading remained cautious ahead of a USA deadline to impose tariffs on Chinese goods.

ANALYST'S TAKE: "We are now two steps removed from the worries of trade tensions as the tariffs deadline looms, locking equity markets in a lackluster trading tone", said Jingyi Pan of IG. The Chinese Ministry of Commerce called Trump's tariffs threats "blackmail" and promised that China would not back down from a trade fight.

Customs services for the US and China will be responsible for collecting the new tariffs as imports pass through the port of entry.

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Those measures appear to be aimed at the United States' heartland, which helped lift Trump into the White House. The initial set of US tariffs could rock companies in the technology sector and hike the price of "Walmart-type" products. Americans worry that rising Chinese technological prowess might erode US industrial leadership and prosperity.

A USA industry source said: "There is a 99 percent chance that tariffs go into force on Friday".

Beijing plans to fire back by hitting 545 American products such as SUVs, meat and seafood.

The US Trade Representative's statement from June 15 said that Customs and Border Protection would begin collecting their additional duties from July 6.

"Are we heading for a full-blown trade war in which case it is very bad news for risk assets, or do we walk away from it, in which case, as we have seen today, markets are likely to rebound quite sharply".

US companies ranging from whiskey distilleries to automakers like Ford and Tesla could be hit if China ramps up retaliatory measures.

Beijing denies it's in the wrong and says it's ready to fight a trade war until the end.

A senior Western diplomat told Reuters that there was no sign of any talks at the moment between the two countries, even via back channels.

This set off furious negotiations, which eventually resulted in a tentative trade agreement between the Trump administration and Chinese officials.

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