U.S. tariffs on $34 billion worth of Chinese goods kicked in on Friday, escalating a war of words between the world's two largest economies into a full-blown trade conflict.
Washington's 25 percent duties went into effect at midnight EDT and affected products such as water boilers, X-ray machine components, airplane tires and various other industrial parts. China immediately implemented retaliatory tariffs on its $34 billion list of goods issued last month, including soybeans, pork and electric vehicles. Beijing called it the "biggest trade war in economic history."
It's unlikely to stop there. In fact, there will be probably be “escalation upon escalation,” warned Geoff Raby, Australia’s former ambassador to China.
Ahead of the Friday implementation of American and Chinese tariffs, Raby told CNBC that “it looks like the first shots to the trade war are about to be fired.”
China, for its part, was already calling the tariff threats between Beijing and Washington a "trade war" in June.
“I thought that by now a negotiated solution would have been found,” Raby told CNBC’s Martin Soong, adding that it seems the U.S. has “walked away” from any potential deal.
President Donald Trump said Thursday that tariffs on $34 billion worth of Chinese goods will kick in at 12:01 a.m. EDT Friday. Another $16 billion are expected to go into effect in two weeks, he said. He told reporters he would also consider imposing additional tariffs on $500 billion in Chinese goods, should Beijing retaliate against the already-scheduled actions.
China had said it would not "fire the first shot."
Raby, who was also his country’s former ambassador to the World Trade Organization, said Trump seemed to be driven by “very short-term political considerations" ahead of U.S. midterm elections in November.
“He’s escalated the dispute, the midterms are coming up, he’s polling well, and tough rhetoric coming out of the White House seems to be playing well with his base.”
He called it a “big risk” for the world trading system that its key player — the United States — is driven by such considerations.
“We’ll probably see escalation upon escalation. China has made it absolutely clear,” Raby said.
“It cannot show weakness in the face of the United States. ... So I think this comes to some sort of end once there’s been a lot of damage done and people start to come to their senses.”