By BLOOMBERG

BEIJING • US President Donald Trump threatened to impose tariffs on every single Chinese import into America as the world’s two largest economies exchanged the first blows in a trade war that isn’t set to end anytime soon.

After months of rhetoric, a 25% levy on US$34 billion (RM136 billion) of Chinese goods entering the US took effect just after midnight Washington time last Friday with farming plows and airplane parts among the products targeted. China hit back immediately via duties on US shipments including soybeans and automobiles.

Neither side shows any signs of backing down. Trump is already eyeing another US$16 billion of Chinese goods, and he indicated to reporters last Thursday on Air Force One that the final tariff total could exceed US$500 billion, almost the same amount that the US imported in 2017. China’s Commerce Ministry accused the US of “bullying” and igniting “the largest trade war in economic history”.

The first ever US tariffs aimed just at China will likely rally Trump’s voters who agree with his “America First” argument that Beijing hasn’t played fair for years, stealing America’s intellectual property and undercutting its manufacturers.

But the risk is that a spiralling conf lict undermines economic growth by gumming up international supply chains and inflicting higher prices on companies and consumers. The US Federal Reserve has already noted some firms are slowing investment, while Harley- Davidson Inc and General Motors Co are warning they may cut jobs.

Given the moves were widely telegraphed, financial markets took them in stride. US stocks rose and the dollar extended losses. Treasuries gained and gold declined as investors assessed the impact of the escalation in the trade rift.

Hours after the tariffs, the US released jobs figures that showed few signs of any early pressures on employment from the trade tension.

US hiring topped forecasts in June, while the unemployment rate rose from an 18-year low and wage gains unexpectedly slowed.

The June jobs data show no evidence of trade fears hurting the US economy, Council of Economic Advisors chairman Kevin Hassett said in an interview on Bloomberg TV last Friday.

“There isn’t clear evidence in the data that the anxiety over trade is being harmful to the industries that we would most watch for harm in,” Hassett said.

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 fallout will be modest, according to Bloomberg Economics.

Under a full-blown trade war in which the US slaps 10% tariffs on all other countries and they respond, the economists reckon US growth would slow by 0.8 percentage point by 2020.

Trump has already imposed duties on foreign steel and aluminium imports, drawing a response from the European Union and Canada which fret he may go after automakers next.

“Our view is that trade war is never a solution,” Chinese Premier Li Keqiang told reporters during a trip to Bulgaria. “No one will emerge as a winner from trade war, it benefits no one.”

The US runs a bilateral trade deficit of US$336 billion with China and imports much more from it than the reverse, giving it an early advantage.

Trump has declared trade wars as “easy to win” and bet the skirmish will prompt American companies to return operations to the US.

In the first round though, the additional Chinese duties on US goods will have a significant impact on some items, risking lower sales. For instance, the tariff on pure-electric vehicles, such as Tesla, will rise to 40% of the value from the current 15%.

US whiskey will be taxed 30%, compared to 5% for alcohol from other nations. US soybeans, a key flashpoint in the worsening trade relations, will see their tariff jumping to 28% of the value, while the soybean duty for some other nations has been lowered to zero recently.

China also has other ways to retaliate by going after US companies such as Apple Inc and Walmart Inc, which operate in its market and are keen to expand. It could introduce penalties such as customs delays, tax audits and increased regulatory scrutiny, while more drastic steps include devaluing the yuan or paring US$1.2 trillion holdings of US Treasuries.