Trump's tariff wars could wipe out a chunk of tax cut benefits

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Earlier, China announced it would impose higher tariffs on a range of USA goods including frozen vegetables and liquefied natural gas, a move that followed Washington's decision last week to hike its own levies on $200 billion in Chinese imports.

According to the Chinese Finance Ministry, 25, 20, and 10 percent import duties for different groups of U.S. goods will come into effect on 1 June.

The hike in tariffs from the Chinese finance ministry comes after US President Donald Trump followed through on his threat to raise tariffs on $200billion of Chinese goods last week.

In a research note, Goldman Sachs economists said new evidence showed the costs of Washington's tariffs on China previous year had fallen entirely on USA businesses and households, with no clear reduction in prices charged by Chinese exporters. "We have the confidence and the ability to protect our lawful and legitimate rights", foreign ministry spokesman Geng Shuang told a daily news briefing.

It's possible President Donald Trump's tariffs on China could help the USA secure a better trading relationship but the strategy could instead blow up in his face, according to a respected US economist. "We hope the United States will meet China halfway to address each other's legitimate concerns". The hawkish Beijing-based Global Times, which often expresses the view of the Chinese Communist Party (CCP), said that China had no reason to fear a trade war with the U.S.

"China should not retaliate - will only get worse!". China will never surrender to external pressure.

"If you add $30 billion of tariffs in the second quarter, that's like having a $120 billion tax increase", Holtz-Eakin said.

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"For the president to be successful, China has to visibly lose and that's not something China's going to do easily, if at all", Holtz-Eakin said.

However, US President Donald Trump left open the door for reconciliation, saying he expected a "fruitful" meeting next month with his Chinese counterpart Xi Jinping at a Group of 20 summit in Japan.

Earlier on Monday, the U.S. president said China would be "hurt very badly" if the country did not make a deal with the US. That being said, with a US election just over a year away, both sides will stand to benefit from the economic boosts that inevitably come from resolving trading issues. But they are also anxious an escalation to cover all trade from China and the Chinese retaliation it would provoke would do far more damage and could even tip the US economy into recession.

Beijing is the biggest holder of United States debt, and Bloomberg estimated previous year that China held around $1.2 trillion.

The Trump administration has said that more details are coming this week regarding the preparations for slapping tariffs on an additional $267 billion worth of Chinese shipments, a move which would effectively see all imports from the country subjected to the punitive duties. Consumer spending accounts for more than two-thirds of US economic activity.

The EU imposed import duties of 25% on a $2.8 billion range of imports from the United States in retaliation for U.S. tariffs on European steel and aluminum.

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