The US-China trade spat could wipe 0.5% off Chinese gross domestic product – if the US carries out its latest threats and Beijing responds.
That is an estimate from economists at Capital Economics, who were predicting the row would cost China 0.1% in GDP before the latest escalation.
They suggest that if the US does impose new tariffs on $100bn of Chinese imports, President Xi Jinping may feel he has no choice but to once again respond in kind.
Julian Evans-Pritchard, senior China economist at the consultancy, explains the risks:
This would mean expanding the proposed Chinese tariff list to cover nearly all imports from the US, which Chinese data put at $155bn last year.
These higher stakes increase the urgency of reaching an agreement with the US but also risk a more damaging outcome if talks break down.
Fighting talk from Beijing this morning as it responds to Trump’s revelation that he is considering new $100bn tariffs on goods imported from China.
China’s Ministry of Commerce said in a statement:
If the US side disregards opposition from China and the international community and insists on carrying out unilateralism and trade protectionism, the Chinese side will take them on until the end at any cost.
We don’t want a trade war, but we aren’t afraid of fighting one.
In the very definition of a tit-for-tat row, Donald Trump announced on Thursday night that he had instructed the US trade representative to consider slapping $100bn in additional tariffs on Chinese goods.
He said in a statement the further measures were being considered “in light of China’s unfair retaliation” against earlier US trade actions.
It came a day after China issued a $50bn list of US goods including soybeans and small aircraft for possible import tariff hikes. That itself was 11 hours after the White House announced a list of 1,333 Chinese imports, also worth about $50bn, for punitive tariffs of 25%.
Traders at spread-betting firm IG are expecting US markets to open lower. (The Wall Street opening bell goes at 2.30pm BST.)
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