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US-China trade war officially takes off

US tariffs on Chinese imports have taken effect. With China having vowed to respond immediately in kind, the world’s two biggest economies took a high-stakes turn toward an all-out trade conflict. China has also imposed tariffs on imported US goods including autos and agricultural products.

The United States may ultimately target over $500 billion worth of Chinese goods, or roughly the total amount that the United States imported from China last year. The US has railed against China for intellectual property theft and barriers to entry for US businesses and a A$375 billion US trade deficit with China. Throughout the escalating conflict, China has sought to take the high road, positioning itself as a champion of free trade.

While the initial volley of tariffs is not expected to have a major immediate economic impact, the fear is that a prolonged battle would disrupt makers and importers of affected goods in a blow to global trade, investment and growth. For companies with supply exposure to tariffs, they will move sourcing country of origin if they can; if they can’t, they’ll pass on as much of the tariff cost as they can, or see a cut in margins. The dispute has roiled financial markets including stocks, currencies and the global trade of commodities from soybeans to coal in recent weeks.

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