TOKYO -- The trade war between the U.S. and China escalated sharply on Monday, with both sides slapping new tariffs on each other and pushing the dispute between the world's two largest economies into uncharted territory.
The moves come as China issued a white paper document condemning U.S. trade policy, and as Beijing reportedly called off trade talks with Washington.
The U.S. on Monday imposed 10% tariffs on $200 billion worth of Chinese imports, and China responded with retaliatory tariffs on $60 billion worth of American imports.
The U.S. tariffs come on top of the $50 billion in imports from China that have already been hit with 25% tariffs. The latest tariffs are spread across 5,745 product lines that range from food items such as soy sauce and rice to handbags and refrigerators.
The tariff rate will increase from 10% to 25% in January 2019, and U.S. President Donald Trump has threatened to impose 25% tariffs on another $267 billion worth of imports if China retaliates. That would then cover the entire $505 billion in Chinese imports to the U.S. in 2017.
China has refused to back down and its latest tariffs cover such U.S. exports as liquefied natural gas and frozen vegetables. They are in addition to $50 billion worth of U.S. imports that have already become subject to tit-for-tat tariffs.
Meanwhile, China has canceled upcoming trade talks with the U.S. following Trump's announcement last week of the new tariffs, according to media reports. The decision further dims prospects of resolving the trade war through negotiations.
Also on Monday, China published a white paper criticizing U.S. trade policies, describing them as "bullyism practices" but also calling for both sides to "pursue reasonable solutions" at addressing trade relations, the official Xinhua News Agency reported. The white paper said the Trump administration had "abandoned the fundamental norms of mutual respect and equal consultation that guide international relations," Xinhua said.
Beijing accused the administration of "contradicting itself and constantly challenging China," which has caused "serious damage" to economic and trade relations, the white paper said, according to Xinhua. U.S. tariffs have posed "a grave threat to the multilateral trading system and the principle of free trade."
The white paper encouraged both countries "to enhance mutual trust, promote cooperation, and manage differences."
Trump has said the tariffs are a retaliation for what he believes is Chinese theft of U.S. intellectual property, and has demanded that China revise what he calls its unfair practices. But the trade war has spiraled lower as negotiations between the two parties show little sign of progress.
Many economists and corporate leaders have warned that the battle will ultimately hurt consumers in the form of higher prices. "China-U. S. trade tensions may sustain for a long time, with occasional escalations," analysts at Nomura said in a Sept. 19 report. It estimated that 25% tariffs on $250 billion worth of Chinese imports could shave 0.33 percentage points from China's economic growth.
In an effort to maintain investor confidence, Chinese Premier Li Keqiang said on Sept. 19 that the country would not devalue its currency to stimulate exports and pledged to cut taxes and treat foreign and domestic companies equally.
Stock market investors, on the other hand, have mostly shrugged off the potential risks. The U.S. benchmark S&P 500 index hit a record high on Sept. 20, with solid economic growth and rising wages underpinning the optimism in corporate earnings growth. Emerging markets in Asia and elsewhere have also enjoyed a rebound after a sell-off in recent weeks.
On Monday, after the latest round of tariffs took effect, Hong Kong's benchmark Hang Seng Index tumbled 1.6%. Stock markets in China and Tokyo were closed for national holidays.
Nikkei Asian Review deputy editor Dean Napolitano in Hong Kong contributed to this article.