US, China stay guarded on talks amid trade war fears

Editorial: Is trade war necessary?

The United States and China have fired the opening shots in a trade war that may be hard to stop.

Investors were unnerved by President Donald Trump's threats of tariffs on an additional $100 billion in Chinese imports as the U.S. president hit out at China's "unfair retaliation" to a prior Trump announcement of $50 billion in tariffs on Chinese goods.

On Wednesday, China unveiled a list of 106 United States goods including soybeans, whiskey, frozen beef and aircraft targeted for tariffs, just hours after the Trump administration proposed duties on some 1300 Chinese industrial, technology, transport and medical products.

A fundamental principle of trade wars is that there's only one group of beneficiaries, but two groups of victims. "So essentially if this becomes a reality two months later, this will be a disastrous situation for US agriculture". Global stock markets were unhappy with the turn of events as Wall Street dropped more than 2%, following European and Asian markets lower.

China plans to slap tariffs on most vehicles, including electric cars. But given every single political economy decision we've made post-millennium explicitly denied the possibility of, and leveraged us to, any ultimate economic (or broader strategic) contest between the United States and China, it's all a bit of a dark joke to tell us to do it today.

Before it's too late.

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Any national preparations made now for said trade war will bring on the very catastrophic economic adjustment it seeks to hedge.

China retaliated by unveiling planned levies on $50 billion worth of major United States exports including soybeans, cars and small aircraft.

The specter of a large-scale trade war between the world's two biggest economies - an event unprecedented in modern times - has people scrambling to anticipate the effects.

That was backed up by Trump's chief economic adviser, Larry Kudlow, who said tariff negotiations with China had not started.

Trump has previously cited the auto trade as an example of the unbalanced playing field, saying China puts a 25 percent duty on imported USA cars while the US charges 2.5 percent for Chinese vehicles. Amid widespread concern and calls for restraint from U.S. businesses and farm states that are most vulnerable to Chinese retaliation, Trump said on Friday the outcome would be worth the short-term risk. Taxes will become reciprocal and a deal will be made on intellectual property. The tariffs have not yet been implemented and the White House said it is open to negotiations with China, even though Beijing has been cool to talks. And that's before you account for the Chinese government's reluctance to put tariffs on goods that might carry some political or strategic cost.

Navarro told CNBC that 's "singular focus is on economic growth, rising wages and a strong manufacturing and defense industrial base."If we hit all points... the market will go up". Tariffs can not have a major effect on the size of the US trade deficit, which rose in February for the sixth straight month, to a near 9.5-year high. "Perhaps there will be some fruitful negotiations", he said. "If we can get those issues resolved positively, there's no damage to the American economy, it's all pluses".

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