The latest salvo from China comes after the United States unveiled tariffs on an additional US$300 billion worth of Chinese goods, including consumer electronics, scheduled to go into effect in two stages on Sept. 1 and Dec. 15.

China will impose additional tariffs of five or 10 per cent on a total of 5,078 products originating from the United States including agricultural products such as soybeans, crude oil and small aircraft. China is also reinstituting tariffs on cars and auto parts originating from the United States.

“China’s decision to implement additional tariffs was forced by the U.S.’s unilateralism and protectionism,” China’s commerce ministry said in a statement, adding that its retaliatory tariffs would also take effect in two stages on Sept. 1 and Dec. 15.

The White House and U.S. Trade Representative’s office did not immediately respond to Reuters’ request for comment on China’s latest tariffs.

Though Chinese and U.S. trade negotiators held another discussion earlier in August, neither side appears ready to make a significant compromise and there have been no sign of a near-term truce.

The protracted dispute has stoked fears about a global recession, shaking investor confidence and prompting central banks around the world to ease policy in recent months. U.S. stocks fell on Friday on the news of China’s tariffs, underscoring growth concerns.

In an interview on CNBC, Federal Reserve Bank of Cleveland president Loretta Mester said she viewed the Chinese retaliatory tariffs as “just a continuation” of the aggravated trade policy uncertainty that has begun weighing on U.S. business investment and sentiment.

Agriculture, auto sectors hit

The knock-on effects of the U.S.-China trade dispute was a key reason behind the Fed’s move to cut interest rates last month for the first time in more than a decade.

“It is unclear as things stand whether the U.S.-China trade negotiations will continue as planned in early September,” said Agathe Demarais, global forecasting director at The Economist Intelligence Unit, in an e-mail statement.

“All eyes will now turn to the U.S. Fed to see whether Jerome Powell, the Fed chairman, will react to these developments by accelerating rate cuts.”

Among U.S. goods targeted by Beijing’s latest tariffs were as soybeans, which will be hit with an extra five per cent tariff starting Sept. 1. China will also tag beef and pork from the United States with an extra 10 per cent tariff.

China is also reinstituting an additional 25 per cent tariff on U.S.-made vehicles and five per cent tariffs on auto parts that had been suspended at the beginning of the year. Carmakers such as Daimler and Tesla had adjusted their prices in China when the auto and auto parts tariffs had been suspended.

Ford, a net exporter to China, said in a statement it encouraged the United States and China to find a near-term solution.

“It is essential for these two important economies to work together to advance balanced and fair trade,” the company said.

White House trade adviser Peter Navarro told Fox Business Network that trade negotiations with China would still go on behind closed doors.

— Reporting for Reuters by Judy Hua, Min Zhang, Se Young Lee, Stella Qiu, Hallie Gu and Dominique Patton in Beijing, Yilei Sun in Shanghai and Doina Chiacu and David Shepardson in Washington.

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Soon after the new duties went into effect, China accused the U.S. of engaging in “trade bullyism” and said it was intimidating other countries to submit to its will, the official Xinhua news agency said, reiterating China’s willingness to fight if necessary.

But Beijing also said it was willing to restart trade negotiations with the United States if the talks are “based on mutual respect and equality,” Xinhua said, citing a white paper on the dispute published by China’s state council.

Why it matters: As the U.S.-China trade war rages on, a global economic slowdown is becoming more possible every day.

U.S. tariffs on $200 billion worth of Chinese goods and retaliatory tariffs by Beijing on $60 billion worth of U.S. products took effect at midday Asian time, though the initial level of the duties was not as high as earlier feared.

Stocks on Wall Street opened lower. Boeing, the biggest U.S. exporter to China, dropped one per cent and Caterpillar 0.5 per cent, leading the losers on the Dow Jones Industrial Average. Network equipment makers Cisco and Netgear were also lower.

“One of the bigger risks with these tariffs going into effect is that the United States may be pushed out of the Chinese market and it is a growing market,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Moody’s said additional U.S. tariffs on Chinese imports are negative for various sectors in both countries and could spread beyond targeted sectors, adding that tariffs are credit negative for U.S. furniture and home goods retailers, with more than half their imports coming from China last year.

The U.S. will levy tariffs of 10 per cent initially, rising to 25 per cent at the end of 2018. Beijing has imposed rates of five to 10 per cent and warned it would respond to any rise in U.S. tariffs on Chinese products.

The two sides had already slapped tariffs on $50 billion worth of each other’s goods.

For U.S. consumers, the new duties could translate into higher prices for Chinese products ranging from vacuum cleaners to technology gear such as home modems and routers, while U.S. goods targeted by Beijing include liquefied natural gas and certain types of aircraft.

U.S. President Donald Trump is pressing China to reduce its huge trade surplus with the U.S. and make sweeping changes to its policies on trade, technology transfers and high-tech industrial subsidies. Beijing has denied that U.S. firms are forced to transfer technology and sees Washington’s demands on rolling back its industrial policies as an attempt to contain China’s economic rise.

The U.S. administration “has brazenly preached unilateralism, protectionism and economic hegemony, making false accusations against many countries and regions, particularly China, intimidating other countries through economic measures such as imposing tariffs,” Xinhua quoted the state council’s white paper as saying.

Several rounds of Sino-U.S. trade talks in recent months have yielded no major breakthroughs and attempts at arranging another meeting in coming weeks have fallen through.

Economists warn that a protracted dispute will eventually stunt growth across the globe. Companies on both sides of the Pacific are already reporting disruptions to their operations and are reviewing investment plans.

The trade tensions have also cast a pall over broader relations between Beijing and Washington, with the two sides butting heads on a growing number of issues.

China summoned the U.S. ambassador in Beijing and postponed military talks in protest against a U.S. decision to sanction a Chinese military agency and its director for buying Russian fighter jets and a missile system.

Rob Carnell, ING’s chief Asia economist, said in a note to clients that in the absence of any incentives Beijing would likely hold off on any further negotiations for now.

“It would look weak both to the U.S. and at home,” he said, adding that there is “sufficient stimulus in the pipeline” to limit the damage of the latest tariffs on China’s economy.

“The U.S.-China trade war has no clear end in sight.”

China may also be waiting for U.S. mid-term elections early next month for any hints of changes in Washington’s policy stance, Carnell added.

“With generic polls favouring the Democrats, they may feel that the trade environment will be less hostile after Nov. 6.”

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The Trump administration tightened pressure for trade concessions from Beijing this week by proposing a higher 25 percent tariff on $200 billion worth of Chinese imports. China vowed to retaliate while also urging Washington to act rationally and return to talks to resolve the dispute.

The United States and China implemented tariffs on $34 billion worth of each others’ goods in July. Washington is expected to soon implement tariffs on an additional $16 billion of Chinese goods, which China has already announced it will match immediately.

China has now either imposed or proposed tariffs on $110 billion of U.S. goods, representing the vast majority of China’s annual imports of American products. Last year, China imported about $130 billion of U.S. goods.

China’s finance ministry unveiled new sets of additional tariffs on 5,207 goods imported from the United States, with the extra levies ranging from 5 to 25 percent.

Timing will depend on the actions of the United States, the Chinese Commerce Ministry said in a separate statement.

“The U.S. side has repeatedly escalated the situation against the interests of both enterprises and consumers,” it said. “China has to take necessary countermeasures to defend its dignity and the interests of its people, free trade and the multilateral system.”

A top adviser to U.S. President Donald Trump said the newly proposed tariffs were not as severe as the White House had been bracing for, and he warned China not to test Trump’s resolve.

“They better not underestimate the president,” White House National Economic Council Director Larry Kudlow said in an interview on Fox Business Network. “He is going to stand tough.”

Tensions weigh on Chinese markets

The United States alleges that China steals U.S. corporate secrets and wants it to stop doing so, and is also seeking to get Beijing to abandon plans to boost its high-tech industries at America’s expense. Washington also wants China to stop subsidising Chinese companies with cheap loans, claiming that this allows them to compete unfairly.

Trump has said he is determined to reduce the large U.S. trade deficit with China.

The U.S. president has accused China and others of exploiting the United States in global trade, and has demanded Beijing make a host of concessions to avoid the new duties on $200 billion of Chinese goods, which could be imposed in the weeks after a comment period closes on Sept. 5.

Beijing says the United States is deliberately creating the trade conflict, using bullying tactics, and ignoring international negotiating norms so that it can stop the rise of China as a competitor on the world stage.

The rising tensions have weighed on Chinese stock and currency markets, with the Chinese yuan falling against the dollar.

“Instead of retaliating, China should address the long-standing concerns about its unfair trading practices,” White House spokeswoman Sarah Sanders said in an emailed statement.

Top diplomats meet

The two countries have not had formal trade talks since early June.

Still, two senior diplomats met earlier on Friday on the sidelines of a regional summit in Singapore.

China is willing to resolve differences with the United States “on the basis of an equal footing and mutual respect,” China’s top diplomat said after meeting U.S. Secretary of State Mike Pompeo.

“He (Pompeo) was accommodating on this as a direction, and said that he does not want current frictions to continue,” said State Councillor Wang Yi, who is also China’s foreign minister.

Answering a reporter’s question about what was specifically said on trade, Wang said: “We did not speak in such details.”

“How can talks take place under this pressure?,” he added.

However, speaking to reporters at the White House, Kudlow said there had been some communication on trade “at the highest level” in recent days.

White House spokeswoman Lindsay Walters also said there had been “high-level discussions on multiple occasions in the past few months” and Washington remained open to further talks with China.

Condoms and coffee

Among U.S. products targeted in the latest Chinese salvo were a wide range of agricultural and energy products, including liquefied natural gas. LNG’s inclusion marks a deployment by Beijing of one of its last major weapons from its energy and commodities arsenal in its fight with Washington.

The market is not large by value compared with approximately $12 billion of U.S. crude that came to China last year, but LNG imports could shoot up as Beijing forges ahead with its plan to switch millions of households to the fuel away from coal.

Morgan Stanley has estimated annual Chinese imports of U.S. LNG could rise to as much as $9 billion within two or three years, from $1 billion in 2017. The amount could be even larger if the United States resolves a logistics bottleneck.

“As the total value of goods under tariffs shoots up, China has little choice but to use LNG and others to top up the value,” said Lin Boqiang, professor on energy studies at China’s Xiamen University.

The American Petroleum Institute, a trade association whose members include Exxon Mobil Corp, Chevron Corp and ConocoPhillips, said the new Chinese tariffs would hurt American workers.

“China is the third-largest importer of U.S. LNG, but U.S. LNG makes up only a modest but growing portion of China’s supply portfolio, which suggests that this particular trade dispute will hurt America more than it hurts China,” Kyle Isakower, API’s vice president for regulatory and economic policy, said.

Other U.S. goods targeted by China in the latest list include semiconductors, some helicopters, small-to-mid-sized aircraft, condoms, iron ore, steel products, roasted coffee, sugar, foods containing chocolate, candies, and even car windscreens.

China’s biggest U.S. imports by value in 2017 were aircraft and related equipment, soybeans and autos.

– Additional reporting by Beijing and Shanghai Newsrooms and Susan Heavey and Ginger Gibson in Washington.

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