File photo: Chinese and US flags are set up for a meeting. Image Credit: Reuters

US President Donald Trump fired the biggest shot yet in the global trade war by imposing tariffs on $34 billion of Chinese imports. China immediately said it would be forced to retaliate.

The duties on Chinese goods started at 12:01am Friday in Washington, just after midday in China. Another $16 billion of goods could follow in two weeks, Trump earlier told reporters, before suggesting the final total could eventually reach $550 billion, a figure that exceeds all of US goods imports from China in 2017.

US customs officials will begin collecting an additional 25 per cent tariff on imports from China of goods ranging from farming plows to semiconductors and airplane parts. China's officials have previously said they would respond by imposing higher levies on goods ranging from American soybeans to pork, which may in turn prompt Trump to raise trade barriers even higher.

"The United States has violated World Trade Organization rules and ignited the largest trade war in economic history,"  China's Commerce Ministry said in a statement. "Such tariffs are typical trade bullying, and this action threatens global supply chains and value chains, stalls the global economic recovery, triggers global market turmoil, and will hurt more innocent multinational companies, enterprises and consumers."

The statement didn't provide details on exactly how or when China would respond. The Finance Ministry has yet to formally issue the final list of goods to which the higher tariffs will apply.

Stocks climbed in Asia and the yen slipped with gold, while Chinese shares reversed losses though remained strongly down for the week. Treasuries declined, as did the yuan.

The riskiest economic gamble of Trump's presidency could spread as it enters a new and dangerous phase by imposing direct costs on companies and consumers globally. It's the first time the US has imposed tariffs aimed just at Chinese goods and follows months of accusations that Beijing stole American intellectual property and unfairly swelled America's trade deficit.

"Clearly the first salvos have been exchanged and in that sense, the trade war has started. There is no obvious end to this," said Louis Kuijs, chief Asia economist at Oxford Economics.

As the world's most developed nation and the rule-maker of the current global governing system, there is "astounding absurdity" in the US complaining that it's been bullied in trade, the People's Daily, the flagship newspaper of the Communist Party of China, said in a Chinese language commentary on Friday.

How China could hurt US businesses in China

Stocks Down

Chinese stocks have taken a beating in recent weeks, and are down more than 16 perc ent this year, as concerns about the trade war have mingled with worries about China's ability to control its debt and maintain growth. They were 1.1 per cent higher at 1:46 p.m. in Shanghai, after earlier falling as much as 1.6 per cent. US stocks are up slightly more than 2 per cent this year as investors have weighed the threat of trade frictions against the strong performance of the US economy.

Trump is doubling down on his promise to put "America First"  in the nation's foreign and economic policies. He blames China for a bilateral trade deficit of $336 billion and for costing US manufacturing jobs.

The tariffs could jeopardize a US economic upswing that has extended to nine years and pushed the jobless rate to the lowest in nearly half a century. US and Chinese companies will now find it costlier to trade with each other, meaning less demand and higher prices. The International Monetary Fund warns an extended spat could undermine the strongest global expansion since 2011.

Risk to Growth

The extent of the economic damage will depend on how far both sides go. If the US and China cool off after a first round of tariffs, the impact on their economies will be modest, according to Bloomberg Economics. Under a full-blown trade war in which the U.S. slaps 10 percent tariffs on all other countries and they respond, the economists reckon US growth would slow by 0.8 percentage point by 2020.

The impact of the first round of tariffs on $34 billion in Chinese goods will be "quite small,"  said Ethan Harris, head of global economic research at Bank of America Merrill Lynch. But he doesn't "see the war ending until there are casualties."

"This plays out over the next few months, until both sides start to feel a little pain and realize this isn't a bloodless march to victory,"  said Harris.

JPMorgan Chase & Co. economists warn the biggest risk may come from the indirect impact of tightening credit conditions and business confidence, reducing scope for investment and hiring while undermining financial markets.

Beijing has shown little interest in making fundamental changes to its economic model. Xi has balked at US demands to stop subsidizing Chinese firms under his plan to make the nation a leader in key technologies by 2025. Negotiations between the two countries petered out with the Chinese accusing the US of blackmail.

The US imports much more from China than the reverse, giving the US an advantage in a tariff dispute. That means that if the dispute deteriorates, Beijing will run out of products to impose tariffs on much faster than the US, and so might retaliate against American companies operating in China. It could even take the drastic steps of devaluing the yuan or reducing its $1.2 trillion holdings of US Treasuries, measures that would hurt it as well as the US.

In the past, the US used its economic clout to win trade skirmishes with developing countries, said James Boughton, a senior fellow at the Centre for International Governance Innovation in Waterloo, Ontario. China, whose economy has grown tenfold since it joined the World Trade Organization in 2001, poses a much more formidable adversary.

"The dynamic is different from anything we've seen,"  said Boughton. "China has an ability to ride out this kind of pressure, to weather the storm, that a lot of countries didn't have in the past."

Trump's many trade wars: a summary

The United States launched what China called the "largest trade war in economic history" between the world's top two economies Friday, imposing tariffs on goods worth around $34 billion annually.

The US-China spat is one of several trade fights picked by the protectionist President Donald Trump as his "America First" agenda clashes with free-trade relations with traditional allies.

The complex web of commercial ties under threat has raised the prospect of a global trade war, sending financial markets tumbling.

Here is a summary of Trump's trade conflicts:

China

After weeks of apparently fruitless negotiations, the US imposed tariffs on approximately $34 billion of Chinese products, sparking an immediate response from Beijing, which said it would hit back but did not provide details.

The tariffs may just be the first shot in a ballooning war, as Trump has warned that he could ratchet up the measures to include $450 billion in goods - the vast majority of all of China's exports to the United States.

Already a second tranche of tariffs on $16 billion in products is under review and could soon be added to the US measures.

The US tariffs target a wide range of Chinese goods - including aircraft parts and computer hard drives - that Washington says have benefited from unfair trade practices.

China's retaliatory measures were expected to hit back largely at agricultural products designed to hurt Trump supporters.

European Union

On June 1, Trump made good on several months of threats and imposed tariffs of 25 percent on steel imports from the EU, along with 10 percent on aluminium imports.

Trump has said the European Union is "possibly almost as bad as China" when it comes to trade, as a raft of retaliatory tariffs from Brussels came into effect on June 22.

From blue jeans to motorbikes and whiskey, the EU's hit-list of products targeted the most emblematic of American exports.

Europe is also worried Washington will follow up on a threat to impose punitive levies on imported cars, something the powerful German car industry particularly fears.

However, signs of a possible thaw emerged on July 5 when the US ambassador in Berlin told bosses at Germany's biggest car firms that Washington was calling on the EU to bring tariffs to zero on car imports - in exchange for equal treatment.

Canada and Mexico

Canada and Mexico, both members with the US of the North American Free Trade Agreement (NAFTA), have not been spared the Washington offensive on steel and aluminium, and are threatening their own reprisals.

Trump and Canadian Prime Minister Justin Trudeau traded barbs over the steel tariffs at a farcical summit of the G7 richest countries that ended on June 9.

Meanwhile talks among the three NAFTA signatories, launched after Trump demanded an overhaul of the "terrible deal", have snagged notably owing to US demands to increase American content installed in duty-free autos.

Japan

Japan is another target of Trump's steel tariffs, which Tokyo calls "extremely deplorable".

It has informed the World Trade Organization (WTO) that it plans to impose retaliatory measures on US goods to the tune of 50 billion yen (395 million euros, $455 million), after failing to persuade Washington to exempt it from the tariffs.

South Korea

In March, Washington and Seoul announced an agreement on a renegotiated free trade accord, giving US carmakers greater access to the South Korean market.

Trump argued the original deal from 2012 was lopsided in Seoul's favour, but has also clouded the issue by appearing to link trade concessions to progress in his separate track of talks with nuclear-armed North Korea.

Russia

Russia, also hit by the US steel tariffs, has informed the WTO that it is planning its own retaliation.

Trade relations were already strained by US sanctions targeting oligarchs and businesses accused of supporting President Vladimir Putin's alleged efforts to undermine Western democracies.

Iran

Trump announced in May he was abandoning the 2015 nuclear deal with Iran - which will mean new sanctions on Tehran and punitive measures for those who trade with it.

Several companies - including Total and Peugeot of France, and Russia's Lukoil - have said they are preparing to exit Iran before US deadlines, the last of which is November 4.