Stock markets fell on Monday after Beijing retaliated to Donald Trump's imposition of tariffs on Chinese steel and aluminum with a plethora of retaliatory duties on 128 imported American products, including pork and apples.
The Dow Jones tumbled by more than 730 points, or 3%, to 23,368 as a selloff swept the New York market but recovered to end the day down 459 points, or 1.9%. The wider S&P 500 index was also down 2.3% and the tech-focused Nasdaq shed 2.74%. The losses were also driven by further falls for Amazon
"There's potential this is a major hit to the pocketbooks of Americans, based on what we're seeing right now," said Jack Cutts, senior director of business research at the Consumer Technology Association.
China's proposed new tariffs cover a significant proportion of what it buys from the United States. The protections on the $50 billion of goods announced on Wednesday, together with those on the $3 billion worth of products that Beijing unveiled earlier this week in retaliation for American tariffs on global steel imports, account for about a third of China's American imports.
"We're down at the basic building blocks of consumer electronics," Cutts said. These parts are included in items from computers to printers to smart refrigerators and coffeemakers, he said.
The USTR list contains a lot of other inputs in final products, like screws, pulleys and motor parts.
Whether prices rise will ultimately depend on the availability of substitutes, said Brad Setser, senior fellow for international economics at the Council on Foreign Relations. In that vein, companies may be able to avoid the tariffs by switching to manufacturing facilities in other countries, like Brazil and Vietnam.
The Beijing ministry said "a large number of people expressed their support" for the measures in order to "safeguard the interests of the country and its industry."
It added that China and the U.S. should resolve issues through negotiation and dialogue. "As the world's two largest economies, cooperation is the only correct option."
Many companies in Europe and the United States say they are afraid the program will create state-supported competitors, an argument that has won backing in the Trump administration. However, China appears to show little interest in putting the Made in China 2025 efforts on the negotiating table. A report in state-controlled media on Wednesday described the development of advanced manufacturing as "an inherent requirement for the transformation and upgrading of China's manufacturing industry, and it is also the only way for China's economy to enter a high-quality development stage."
Chinese officials have blamed President Trump for provoking the clash and have appealed to the World Trade Organization, which sets trade rules and moderates disputes, to resolve the feud. Yet, both sides risk punishment by the W.T.O. - the Trump administration for its tariffs, and China for swiftly retaliating without a proper review.
"A key time has come for the United States and China to form a new consensus that includes intellectual property and the opening up of markets," said Song Guoyou, the deputy chief of the Center for American Studies at Fudan University. "Otherwise, trade may fluctuate a lot."
