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China will retaliate against Trump's tariffs, says former US ambassador

  • Beijing will take retaliatory action against heavy steel and aluminum tariffs from the U.S., said Max Baucus, former ambassador to China.
  • U.S. agricultural exports will be vulnerable to retaliation, Baucus said. The U.S. is a major grains producer and exporter.

Beijing will respond negatively to President Donald Trump's announcement of tariffs on steel and aluminum imports, a former U.S. ambassador to China said.

"China will probably take retaliatory actions in some form," Max Baucus told CNBC on Friday.

This is even though much of the steel that is imported to the U.S. does not come from China but from Canada, Brazil and South Korea. U.S. is the world's largest steel importer.

"China's reaction and as well as that of other countries all very much depends on how specifically targeted [the tariffs] are. My guess is they will respond in some adverse way," Baucus said.

U.S. agricultural exports will be vulnerable to retaliation, Baucus said. The U.S. is a major grains producer and exporter.

Trump said on Thursday that the U.S. will impose tariffs of 25 percent for steel and 10 percent for aluminum. The tariffs will be implemented broadly, without targeting specific countries. Markets are now worried about a trade war.

Although there is "clearly a problem" with overcapacity in the steel and aluminum industries that is depressing prices, it's more appropriate to address the oversupply directly, Baucus said.

He said invoking the national security argument for higher tariffs may well backfire.

"It's going to be challenged by other countries not only at the WTO (World Trade Organization), but they themselves might attempt their own national security tariffs to protect their countries. We are in dangerous times," he added.

The U.S. should take a more constructive approach when dealing with trade disputes, Baucus said.

"I hope, frankly, the country is a lot more solid and constructive, more sophisticated in dealing with these issues," he said.

After all, it will be difficult not just with China but other trade partners, such as Canada.

Ongoing negotiations over the North American Free Trade Agreement will be complicated by the Thursday's announcement of heavier steel and aluminum tariffs, Baucus said.

"The problem here frankly is [that] it comes across as very antagonistic and adversarial. That just tends not to work very well," he added.