US and China threaten tariffs as fears rise

WASHINGTON (AP):

The world's two biggest economies stand at the edge of the most perilous trade conflict since World War II. Yet, there is still time to pull back from the brink.

Financial markets bounced up and down yesterday over the brewing US-China trade war after Beijing and Washington proposed tariffs on $50 billion's worth of each other's products in a battle over the aggressive tactics China employs to develop its high-tech industries.

"The risks of escalation are clear," Adam Slater, global economist at Oxford Economics, wrote in a research note. "Threats to the US-China relationship are the most dangerous for global growth."

There's time for the two countries to resolve the dispute through negotiations in the coming weeks. The United States will not tax 1,300 Chinese imports - from hearing aids to flamethrowers - until it has spent weeks collecting public comments. It's likely to get an earful from American farmers and businesses that want to avoid a trade war at all costs.

Also, China did not say when it would impose tariffs on 106 US products, including soybeans and small aircraft, and it announced it is challenging America's import duties at the World Trade Organization.

Lawrence Kudlow, the top White House economic adviser, sought to ease fears of a deepening trade conflict with China, telling reporters that the tariffs the US announced Tuesday are "potentially" just a negotiating ploy.

"We're very lucky that we have the best negotiator at the table in the president, and we're going to go through that process," said White House Press Secretary Sarah Huckabee Sanders. "It will be a couple months before tariffs on either side would go into effect and be implemented, and we're hopeful that China will do the right thing."

The prospect of a negotiated end to the dispute calmed nerves on Wall Street. After plunging in early trading, the Dow Jones industrial average ended up rising 231 points, or nearly one per cent, to 24,264.