China may have 'underestimated' Trump's resolve

Trump has already ordered 25 percent tariffs on $50 billion in Chinese products. "We have no choice. China has been taking out $500 billion a year out of our country and rebuilding China".

He said the move would be in retaliation for China's decision to raise tariffs on $50 billion in USA goods.

"Just about every major information and communication technology product was exempted", one USA industry told Reuters. China denies such theft and accuses Washington of "deviating from the consensus reached by both parties". A June monthly survey of 272 US business leaders by Chief Executive magazine found growing fear about global conflict on trade matters.

On Wall Street, the Dow Jones Industrial Average closed down 1.1% on Tuesday.

China's stock market dropped 2.7 percent, while Japan's Nikkei ended down by 1.7 percent.

The dollar index.DXY rose 0.31 percent, with the euro EUR= down 0.46 percent to $1.1569, though the euro trimmed some losses as France's and Germany's leaders agreed on a euro zone budget.

The White House says the USA can withstand trade tensions See how American businesses are girding for new tariffs Trade war's coming for your hip pocket America The IMF says the global outlook is worse as tensions rise Here's what a full-blown global trade war might look like What economists say about Trump's new trade threats Trumps Tariffs spread pain to non-Chinese companies. On July 6th, both the US and China will impose 25% tariffs on $34 billion worth of Chinese and USA imports, respectively.

The president said the penalties will go into effect "if China refuses to change its practices" and proceeds with its plans for retaliatory tariffs.

Trump said that he had ordered US Trade Representative Robert Lighthizer to identify a second tranche of goods imported from China for tariffs of 10 per cent.

Beyond tariffs: How else can China hit U.S. products?

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National Trade Council adviser Peter Navarro waits on President Donald Trump in the Oval Office at the White House, March 31, 2017, in Washington.

"There is going to be a sales lull that will keep these barrels trapped and the widening of the spread that we see will persist and get worse before it gets better", said John Kilduff, partner at Again Capital LLC in NY.

For months now, the United States and China have been exchanging ever-escalating threats, raising fear about a potentially destabilizing trade war.

Trump said after the legal process is complete, these tariffs worth United States dollars 200 billion will go into effect if China refuses to change its practices.

Trump has argued that it would be easy for America to win a trade war with the Chinese, since nations with trade deficits have an inherent advantage in such conflicts.

He doubts the latest dispute would damage the relationship between the two countries.

He also added the actions are (quote) "necessary to defend" the U.S.

Chicago Board of Trade soybeans 0#S: fell as much as 6 percent, while wheat slumped 0#W: more than 4 percent.

A seagoing barge is loaded with crude oil from the Eagle Ford Shale formation at the newly expanded crude dock at the Port of Corpus Christi, Texas, U.S., April 10, 2014. China so far has said it would target only smaller versions of the jet and the country's options are limited since competing planes from Europe's Airbus are largely sold out for the next several years.

Dan Boylan contributed to this article, which is based in part on wire service reports.

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