Are the USA and China heading for a full-blown trade war?

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"In addition to soybeans, China threatened to retaliate with tariffs on American cars, chemicals and other products", The New York Times reported Thursday.

Party mouthpiece People's Daily also alluded to the shifting Sino-US economic relationship, and that Mr Trump's latest threat showed the US' "sinister intention of using a trade war to contain China's development". China responded within hours by announcing $50 billion worth of tariffs on U.S. goods. China responded by saying it was ready to put import taxes on almost 40 percent of US products sent to China.

This was two days after the USA released a list of 1,300 products it proposed hitting with tariffs, totaling about $50 billion in trade.

On Thursday, Trump directed USA trade officials to identify tariffs on another $100 billion of Chinese imports, upping the ante in an already high-stakes trade confrontation between the world's two largest economies.

The White House said yesterday it has initiated a World Trade Organisation dispute against China and is examining potential restrictions on Chinese investment. A politician saying "we're running record trade deficits" and a politician saying "we're running record capital surpluses" are saying the same thing.

Before the opening bell, the S&P is down 1.7 percent, with the Dow and the Nasdaq over 2 percent lower.

"I'm not saying there's not going to be any pain", he told WABC radio in NY, but "we're going to be much stronger for it". Gao said comments from United States officials about ongoing talks about trade issues were incorrect. It can spread the pain of a trade war while tolerating years of losses from state-run companies that dominate major sectors of the economy. A key reason is that in the absence of United States leadership, China faces less resistance in setting the worldwide standards in trade and investment and technology development.

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Canadian Prime Minister Justin Trudeau said any United States tariffs on steel and aluminium would be "absolutely unacceptable" and vowed to continue to engage with American officials on the issue.

But if this spirals into a bigger conflict between the world's two biggest economies, it's worth keeping something in mind: In a trade war, the usual rules of commerce may not apply.

Trump's new round of tariffs would have similarly negative consequences for the USA pharmaceutical industry, which makes heavy use of ingredients produced overseas.

Meanwhile, Larry Kudlow continued to do the media rounds. Other U.S. carmakers such as General Motors and Ford Motor also manufacture in China.

While rising trade tensions have roiled markets, experts said the greater implication for Asia should the tariffs take effect is the risk to economic growth. "If we can get those issues resolved positively, there's no damage to the American economy, it's all pluses".

"Raw material prices, already on an uptrend since mid-2017, will likely be pushed up further as hoarding and speculation take place in anticipation and reaction to tariffs", he added. There is still time for negotiations and opportunities for a mutually face-saving deal, though the uncertainty in the meantime is likely to be extremely damaging.

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