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China vows to 'fight back' after USA threaten $200bn tariffs on goods

Chairman Xi speaks at the National People’s Congress in Beijing

The latest round of import taxes on Chinese goods has a two month public commentary period and the USA administration is being open about the fact that they expect China to discuss the move leading one to wonder if it will actually be imposed.

Research from Capital Economics (CE) shows sales from US-owned affiliates total $US350 billion - similar in size to the USA trade deficit.

US President Trump subsequently threatened to apply a 10% tariff on another $US200 billion worth of Chinese products. "China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology", Trump said.

Such language, if passed, would not affect these tariffs against Beijing, but could affect penalties in place on almost all imports of steel and aluminium - from China as well as U.S. allies like Canada, Mexico and the EU. Each side is mulling tariffs on a further $16 billion in goods that would bring the totals to $50 billion. The tariffs announced Tuesday would be the third wave.

The market slide may have been contained in part by speculation the Trump administration could change its mind by the end of August, when the tariffs are due to come into effect, some strategists said. That prompted fears Beijing, running out of imports for retaliation due to its lopsided trade balance with the US, might try to disrupt operations of American automakers, retailers and others that see China as a key market.

But China has rebuffed US complaints and denied any harm was done to USA companies, and instead retaliated "without any worldwide legal basis or justification", Lighthizer said.

NAM urged the Trump administration to negotiate a trade treaty with China. David French, a senior official at the National Retail Federation, told the Financial Times that they could "boomerang back" and hit consumers and workers.

The main demand of the United States, which was set out in a statement issued on May 4, is that China cease its attempt to develop its technological and industrial base under its "Made in China 2025" plan.

She said the downside risk to growth mainly stemmed from trade tensions. However, analysts say there's little chance China will back down on the plan, which it considers crucial for developing its huge economy.

It's been just a few days since the two countries imposed tit-for-tat tariffs of 29 billion euros.

However, Lighthizer still left some room for potential negotiations with China before the new round of tariffs.

China could also limit visits to the United States by Chinese tourists, a business state media said is worth US$115 billion, or shed some of its US Treasury holdings, Iris Pang, Greater China economist at ING in Hong Kong, wrote in a note.

They also said they remain open to working with China to try to resolve the dispute, but the response from Beijing so far has been unsatisfactory.

"The last thing America's manufacturing workers need is an escalating trade war", said NAM President and CEO Jay Timmons.

Tuesday's announcement was met with backlash from some quarters.

Senate Finance Committee Chairman Orrin Hatch said the announcement "appears reckless and is not a targeted approach".

"Unilateral actions that alienate long-standing US allies and close off the USA market to the rest of the world are not a recipe for economic growth and prosperity and are very unlikely to change China's unfair practices", ACC said.

Even more tariffs could be on the way.