Liu He, a special envoy of China’s President Xi Jinping, negotiated a new deal with Washington. Picture: REUTERS
Liu He, a special envoy of China’s President Xi Jinping, negotiated a new deal with Washington. Picture: REUTERS

Beijing — The US and China imposed fresh tariffs on each other’s goods on Monday as the world’s biggest economies showed no signs of backing down from an increasingly bitter trade dispute that is expected to knock global economic growth.

Soon after the new duties went into effect, China accused the US of engaging in "trade bullyism" and said it was intimidating other countries to submit to its will, the 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 US 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.

US tariffs on $200bn worth of Chinese goods and retaliatory tariffs by Beijing on $60bn worth of US 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 US exporter to China, dropped 1% and Caterpillar 0.5%, leading the losers on the Dow Jones Industrial Average.

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

The Dow Jones Industrial Average fell 56.31 points, or 0.21%, to 26,687.19, the S&P 500 lost 7.51 points, or 0.26%, to 2,922.16 and the Nasdaq Composite dropped 45.88 points, or 0.57%, to 7,941.08.

Moody’s said additional US 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 US furniture and home goods retailers, with more than half their imports coming from China in 2017.

The US will levy tariffs of 10% initially, rising to 25% at the end of 2018. Beijing has imposed rates of 5%-10% and warned it would respond to any rise in US tariffs on Chinese products accordingly. The two sides had already slapped tariffs on $50bn worth of each other’s goods.

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

President Donald Trump is pressing China to reduce its huge bilateral trade surplus and make sweeping changes to its policies on trade, technology transfers and high-tech industrial subsidies. Beijing has denied that US 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 US 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-US trade talks in recent months have yielded no major breakthroughs and attempts at arranging another meeting have fallen through. A senior White House official said last week the US will continue to engage China, but added there was no date for further talks.

China, which has accused Washington of being insincere in the negotiations, has decided not to send vice-premier Liu He to Washington this week, The Wall Street Journal reported late last week.

News of Beijing’s decision to skip the talks pushed China’s yuan currency down 0.3% on Monday in offshore trade, reinforcing investors’ fears that both sides are digging in for a long fight. Mainland China markets were closed for a holiday.

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.