"As the Chinese saying goes, it is only polite to reciprocate” - China’s embassy in Washington.

 

The US will within weeks begin imposing a 25 per cent tariff on 1,333 products from China ranging from industrial robots and electric cars to locomotives and jet engines in retaliation for what it says has been decades of state-backed intellectual property theft by Beijing. 

 

The list, which covers imports worth some $50bn last year, calls for the most aggressive US trade response to China’s actions since China joined the World Trade Organization in 2001. 

 

In a statement released in response, China’s embassy in Washington condemned the Trump administration's list and vowed to retaliate. 

 

"Such unilateralistic and protectionist action has gravely violated fundamental principles and values of the WTO. It serves neither China’s interest, nor U.S. interest, even less the interest of the global economy," the embassy said. 

 

Here is a round-up of what analysts are saying about the escalating trade war between the world’s two largest economies. 

 

JPMorgan Asset Management chief market strategist for Asia-Pacific Tai Hui said notwithstanding a “sharp initial sell-off” in the most exposed industries, “history suggests negotiation is likely to follow, which would provide some much needed short term relief to investors”. 

 

“This Sino-US trade tension could go through several rounds in coming years,” Mr Hui said. “This could encourage investors to focus on sectors and markets in Asia that are more dependent domestic demand, boosted by structural growth, and less exposed to trade disputes.” 

 

AxiTrader chief market strategist Greg McKenna said bond markets had not immediately reacted because on “the current scale the tariff battle is unlikely to materially impact either Chinese, US, or global growth”. 

 

However, should the sanctions and counter sanctions between the US and China grow, then bonds are likely to react as global growth becomes threatened, he said. 

 

“Bonds will react to any change in expected growth – but that is just a semi-distant fear at present,” he said. “More important will be what happens to stocks and whether they start falling again.” 

 

But he added that given the “aggressive tone” of Chinese state media in recent days and the comments this morning from officials in Beijing, “means that we are past the first shots fired in an escalating trade war”. 

 

 Westpac senior currency strategist Sean Callow did not expect to see an “obvious” immediate response from foreign exchange markets to the latest tariffs. 

 

“But with [Chinese state news agency] Xinhua today reporting China is planning ‘same scale’ reciprocal trade measures against the US, there is clearly scope for more action that could have an impact on [foreign exchange],” Mr Callow said, adding that the Australian dollar “seems most at risk” with negative sentiment on Australia’s exposure to industrial commodity exports. 

 

“It seems quite striking that [Australian dollar] is down versus every major Asian currency since trade war fears escalated on 1 March.”

 

Ahead of the latest US tariff announcement, Moody's noted that the importance of tariff announcements by both the US and China “lies in what they may portend for overall bilateral trade and investment relations between the two countries”. 

 

“Moreover, the US and China are the world’s largest economies and they play a large role in global trade, production supply chains and investment,” the ratings agency said. “Therefore, their policy actions would likely have global macroeconomic and credit implications.”