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Sino File | US-China trade war: bad for business is just the beginning
The spiral rise of tit-for-tat tariffs between the US and China threatens to spill beyond the world of trade
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Since the time of Adam Smith and David Ricardo, mainstream economic theory has held that free trade is the best policy for all and that trade wars are mutually destructive. Yet with the US and China escalating their threats of tariffs on each other’s goods, the probability of a full-blown trade war between the world’s two largest economies is rising.
When US President Donald Trump announced plans to impose 25 per cent tariffs on US$50 billion worth of Chinese imports, Beijing retaliated swiftly with moves of the “same scale and intensity”, imposing tariffs on US$50 billion of US products. Beijing also said all previous US-China trade negotiations would be invalidated.
In the days since, Trump has twice raised further tariffs targeting US$400 billion in Chinese imports, raising the total to US$450 billion in tariffs, a figure that approaches total annual Chinese exports to the US.
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China imported US$129.89 billion of US goods last year, while America bought US$505.47 billion from China, according to US figures.
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China, then, cannot match America’s moves on tariffs alone. However, it is possible that Washington and Beijing may also take non-tariff measures, such as putting restrictions on investments, or retaliating against each other’s firms.
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