The world’s two largest economies have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to risks to global economic growth.

China’s Commerce Ministry said Washington was “remaining obstinate” by implementing the latest tariffs, which kicked in on both sides as scheduled at 12:01 p.m. in Beijing (12:01 a.m. EDT/0401 GMT).

“China resolutely opposes this, and will continue to take necessary countermeasures,” it said in a brief statement, adding that Beijing will file a complaint over the latest tariffs with the World Trade Organization.

The tariffs, scheduled weeks ago, did not interfere with the start of a second day of trade talks in Washington led by Chinese Commerce Vice Minister Wang Shouwen and David Malpass, the U.S. Treasury under secretary for international affairs.

Wang, asked by a Reuters reporter how the talks were progressing, declined to comment as he and his delegation entered the U.S. Treasury building on Thursday morning.

President Donald Trump has threatened to put duties on almost all of the more than $500 billion of Chinese goods exported to the United States annually unless Beijing agrees to sweeping changes to its intellectual property practices, industrial subsidy programs and tariffstructures, and buys more American goods.

That figure would be far more than China imports from the United States, raising concerns that Beijing could consider other forms of retaliation, such as making life more difficult for American companies in China or allowing its yuan currency to weaken further to support its exporters.

“We have more bullets”

Trump administration officials have been divided over how hard to press Beijing, but the White House appears to believe it is winning the trade war as China’s economy slows and its stock markets tumble.

“They’re not going to give that up easily. Naturally they’ll retaliate a little bit,” U.S. Commerce Secretary Wilbur Ross said on CNBC on Wednesday at a Century Aluminum Co smelter in Kentucky that has benefited from Trump’s aluminum tariffs.

“But at the end of the day, we have many more bullets than they do. They know it. We have a much stronger economy than they have, they know that too,” Ross said.

Economists reckon that every $100 billion of imports hit by tariffs would reduce global trade by around 0.5 percent.

They have assumed a direct impact on China’s economic growth in 2018 of 0.1 to 0.3 percentage points, and somewhat less for the United States, but the impact will be bigger next year, along with collateral damage for other countries and companies tied into China’s global supply chains.

Hard line rattles Beijing

The two days of talks in Washington were the first formal negotiations since Ross met with Chinese economic adviser Liu He in Beijing in June.

Business groups expressed hope that the meeting would mark the start of serious negotiations over Chinese trade and economic policy changes demanded by Trump.

However, Trump on Monday told Reuters in an interview that he did not “anticipate much” from this week’s talks.

The U.S. president’s hard line has rattled Beijing and spurred rare criticism within the highest levels of China’s ruling Communist Party over its handling of the trade dispute, sources have said.

Beijing has denied U.S. allegations that it systematically forces the unfair transfer of U.S. technology and has said that it adheres to World Trade Organization rules.

Foreign Ministry spokesman Lu Kang would not reveal any details of the talks during a daily news briefing.

“We hope that the U.S. side can meet China halfway, and with a rational, pragmatic attitude, conscientiously with China get a good result,” Lu said.

Semiconductors, plastics hit

Washington’s latest tariffs apply to 279 product categories, including semiconductors, plastics, chemicals and railway equipment, that the Office of the U.S. Trade Representative has said benefit from Beijing’s “Made in China 2025” industrial plan to make China competitive in high-tech industries.

China’s list of 333 U.S. product categories hit with duties includes coal, copper scrap, fuel, steel products, buses and medical equipment.

Though it is too early for trade damage to show up in much economic data as yet, tariffs are beginning to increase costs for consumers and businesses on both sides of the Pacific, forcing companies to adjust their supply chains and pricing, with some U.S. companies looking to decrease their reliance on China.

One executive at a major U.S. manufacturer in China told Reuters the uncertainty about the trade conflict’s duration was more damaging than the tariffs themselves because it made business planning difficult.

If the tariffs are in place for a long while, there will come a point at which the company would begin moving some sourcing and production out of China, a process that would be irreversible for several years once set in motion, the executive said, declining to be identified due to the sensitivity of the matter.

– Reporting by David Lawder, Steve Holland and Tim Aeppel in Washington and Tony Munroe, Michael Martina, and Ben Blanchard in Beijing.

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The speed with which the trade struggle between Washington and Beijing is ratcheting up — the Chinese government took less than 11 hours to respond with its own measures — led to a sharp selloff in global stock markets and commodities.

Investors are wondering whether one of the worst trade disputes in many years could now turn into a full-scale trade war between the world’s two economic superpowers.

“The assumption was China would not respond too aggressively and avoid escalating tensions. China’s response is a surprise for some people,” said Julian Evans-Pritchard, senior China economist at Capital Economics, noting that neither side had yet called for enforcement of the tariffs.

“It’s more of a game of brinkmanship, making it clear what the cost would be, in the hopes that both sides can come to agreement and none of these tariffs will come into force,” he said.

Beijing’s latest list of 25 per cent additional tariffs on U.S. goods covers 106 items with a trade value matching the $50 billion targeted on Washington’s list, China’s commerce and finance ministries said. The effective date depends on when the U.S. action takes effect.

Unlike Washington’s list, which was filled with many obscure industrial items, China’s list strikes at signature U.S. exports, including soybeans, frozen beef, cotton and other key agricultural commodities produced in states from Iowa to Texas that voted for Donald Trump in the 2016 presidential election.

“This is a real game changer and moves the trade dispute away from symbolism to measures which would really hurt U.S agricultural exports,” said Commerzbank commodities analyst Carsten Fritsch.

China’s tariff list covers aircraft that would likely include older models like Boeing’s workhorse 737 narrowbody jet, but not newer models like the 737 MAX or its larger planes. A Beijing-based spokesman for Boeing declined to comment.

Beijing’s announcement triggered heavy selling in global financial markets, with U.S. stock futures sliding 1.5 per cent and U.S. soybean futures plunging nearly five per cent and on track for their biggest fall since July 2016. The dollar briefly extended early losses, while China’s yuan skidded in offshore trade.

Rapid response

Hours earlier, the U.S. government had unveiled a detailed breakdown of some 1,300 Chinese industrial, transport and medical goods that could be subject to 25 per cent duties, ranging from light-emitting diodes to machine parts.

The U.S. move, broadly flagged last month, is aimed at forcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forced technology transfer from U.S. companies to Chinese competitors, charges Chinese officials deny.

Foreign ministry spokesman Geng Shuang said China had shown sincerity in wanting to resolve the dispute through negotiations.

“But the best opportunities for resolving the issues through dialogue and negotiations have been repeatedly missed by the U.S. side,” he told a regular briefing on Wednesday.

The tariff list from the office of U.S. Trade Representative Robert Lighthizer followed China’s imposition of tariffs on $3 billion worth of U.S. fruits, nuts, pork and wine to protest new U.S. steel and aluminum tariffs imposed last month by Trump (all figures US$).

Publication of Washington’s list starts a public comment and consultation period expected to last around two months.

Will consumers pay?

Many consumer electronics products such as cellphones made by Apple Inc. and laptops made by Dell were excluded, as were footwear and clothing, drawing a sigh of relief from retailers who had feared higher costs for U.S. consumers.

A U.S. industry source said the list was somewhat unexpected in that it largely exempts major consumer-grade technology products, one of China’s major export categories to the U.S.

“The tech industry will feel like overall it dodged a bullet,” the source said, but added that traditional industrial goods manufacturers, along with pharmaceuticals and medical device firms, could suffer.

Many U.S. business groups support Trump’s efforts to stop the theft of U.S. intellectual property, but have questioned whether tariffs are the right approach. They warn that disruptions to supply chains that rely on Chinese components will ultimately raise costs for consumers.

“Tariffs are one proposed response, but they are likely to create new challenges in the form of significant added costs for manufacturers and American consumers,” National Association of Manufacturers president Jay Timmons said in a statement.

Algorithm shields U.S. consumers

USTR developed the tariff targets using a computer algorithm designed to choose products that would inflict maximum pain on Chinese exporters, but limit damage to U.S. consumers.

A USTR official said the list got an initial scrub by removing products identified as likely to cause disruptions to the U.S. economy and those that needed to be excluded for legal reasons.

“The remaining products were ranked according to the likely impact on U.S. consumers, based on available trade data involving alternative country sources for each product,” the official, who spoke on condition of anonymity, told Reuters.

The tariff list targeted products that benefit from China’s industrial policies, including its “Made in China 2025” program, which aims to replace advanced technology imports with domestic products in strategic industries, such as advanced information technology, robotics, and pharmaceuticals.

Such policies coerce U.S. companies into transferring their technology and intellectual property to Chinese enterprises and “bolster China’s stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans,” USTR said.

Many products in those segments appear on the list, including antibiotics and industrial robots and aircraft parts.

USTR did include some key consumer products from China, including flat-panel television sets and motor vehicles, both electric and gasoline-powered with engines of three litres or less.

A Reuters analysis that compared listed products with 2017 Census Bureau import data showed $3.9 billion in flat-panel television imports, and $1.4 billion in vehicle imports from China.

Among vehicles likely to be hit with tariffs is General Motors’ Buick Envision sport-utility vehicle, which is assembled in China and sold in the U.S. Volvo, owned by China’s Geely Motors, also exports Chinese-built vehicles to the U.S.

More than 200 products on the list saw no U.S. imports last year, including large aircraft and communication satellites, while some categories were highly unlikely to ever be imported, such as China-made “mortars” and “grenade launchers.”

USTR has scheduled a May 15 public hearing on the tariffs, which were announced as the result of an investigation under Section 301 of the 1974 U.S. Trade Act.

China ran a $375 billion goods trade surplus with the U.S. in 2017, a figure that Trump has demanded be cut by $100 billion.

— Reporting for Reuters by David Lawder, Jason Lange, Ginger Gibson, Steve Holland, and David Chance in Washington; Michael Martina, Cheng Fang, Ryan Woo, Ben Blanchard, Tony Munroe, Cate Cadell, Philip Wen and Dominique Patton in Beijing and Engen Tham in Shanghai; additional reporting by Brenda Goh in Shanghai, Stella Qiu in Beijing, Tom Miles in Geneva and Michael Hogan in Hamburg.

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On Sunday, the Ministry of Commerce launched an anti-dumping and anti-subsidy investigation, potentially leading to hefty tariffs on imports of the ingredient used in livestock feed and the fiery Chinese liquor baijiu.

It comes less than a fortnight after Trump slapped steep tariffs on imports of solar panels and washing machines and two months after Washington’s decision to investigate Chinese aluminum alloy sheet, the first U.S.-initiated anti-subsidy and anti-dumping probe in decades.

Those moves had rekindled concerns among global policymakers and markets of a U.S.-China trade war.

The U.S. accounts for more than 90 per cent of total sorghum arrivals in China. U.S. imports were worth just over $1 billion last year (all figures US$).

The commerce ministry said it had initiated the investigation because the local industry included a large number of small growers who were unable to prepare the necessary documentation.

Chinese Foreign Ministry spokesman Geng Shuang said the issue was an “individual, normal trade remedy investigation case.”

Deploying the rarely-used tactic of self-initiating, rather than responding to complaints from farmers, suggests the probe had been in the works for some time, and was viewed by trade experts as retaliation for recent U.S. actions against China.

China has used other niche farm products such as distillers’ dried grains to hurt the U.S. in recent years.

But taking aim at sorghum at a time when the global grain market is in surplus and growers around the world are scrambling to find homes for their products hits at Trump’s core political base while avoiding damaging supplies of a product critical at home.

Texas and Kansas, major Republican strongholds or “red states,” produce most of the U.S. sorghum crop.

“They believe that if they ratchet up the heat in key red states where there’s a large agricultural community that’s voted for Donald Trump that it will somehow change the situation,” said Paul Burke, Asia director at U.S. Soybean Export Council.

While many sorghum traders in China were surprised by the news, they said they would likely switch to buying from the nation’s ample supplies of locally-grown corn instead. China’s state reserve is big enough to feed the country for a year.

‘Political resonance’

Business executives had expected Beijing to target commodities, a major U.S. export to China, in any response to the escalating trade dispute.

Last week Lester Ross, chairman of the policy committee at the American Chamber of Commerce in China, told reporters that China would take aim at sectors with “political resonance in the United States,” such as commodities and aircraft.

With Trump threatening further action on steel and aluminum imports from China as well as alleged Chinese intellectual property rights abuses, the conflict could escalate further.

Many Chinese experts think politicians in Washington are not prepared to pay the heavy economic and political price needed to upset trade dynamics between the world’s two largest economies, including a large Chinese trade in goods surplus.

But some business executives warn that invoking a Cold War-era trade law to impose tariffs on steel and aluminum could trigger a trade war, which could expand to other more critical commodities, such as soybeans, the United States’ biggest agricultural export by value worth more than $12 billion last year.

China’s commerce and agriculture ministries told a delegation of U.S. soy growers last September that soybeans were being considered as a target for retaliatory action, Burke said.

“We’re watching the situation very closely,” he told Reuters on Monday.

— Reporting for Reuters by Dominique Patton and Michael Martina; additional reporting by Hallie Gu and Ben Blanchard; writing by Josephine Mason.

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Speaking after a meeting with Chinese Premier Li Keqiang, Trudeau said if “done properly,” such an agreement would benefit both countries and strengthen the middle class.

“It’s an opportunity that makes sense for Canadian businesses,” he said at the start of a five-day trip to China. “Canada is and always has been a trading nation. But the landscape of trade is shifting and we need to adjust to it.”

Li said China remained open to exploring a free trade deal with Canada as part of joint efforts to safeguard world trade liberalization and advance globalization.

“We have an open attitude toward the process of negotiations, and an open attitude towards their contents,” Li said.

Canada is considering whether to launch talks on a free trade deal with China, which wants a trade pact similar to the ones it has with Australia and New Zealand.

But Trudeau, aware of domestic unease at the idea, is moving slowly. Although polls consistently show Canadians are split over the merits of a trade deal, Canada needs to diversify exports to offset the possible damage done if the U.S. pulls out of NAFTA.

Trudeau’s visit, which began on Sunday, comes as plane maker Bombardier is eager to win a breakthrough order from Chinese carriers for its CSeries jet, whose fuselage is made in China.

But the chance of sealing such deals has become more cloudy after Canada encouraged Bombardier to sell a controlling stake in the CSeries programme to Airbus rather than a Chinese firm.

“On the agricultural front, I’m pleased to announce the Canadian beef and pork will have greater access to the Chinese market,” Trudeau said, without elaborating.

China has been loosening restrictions on beef imports this year to feed the appetite of the country’s growing middle class for more Western food.

Trudeau said he also agreed with Li a joint statement that affirms a commitment to “mitigating the global threat of climate change” and lays out a plan for closer collaboration.

Earlier on Monday, Trudeau promoted Chinese tourism to Canada at an event held at the headquarters of China’s Twitter-like online media company, Sina Weibo.

Canada has said it will co-host a January meeting with the U.S. of up to 16 foreign ministers in Vancouver to produce “better ideas” to ease tensions over North Korea’s nuclear and ballistic tests.

In late November, North Korea tested its most advanced intercontinental ballistic missile yet, putting the continental U.S. within range and increasing pressure on U.S. President Donald Trump to deal with the nuclear-armed nation.

Li said he discussed international and regional issues with Trudeau, but did not elaborate.

— Michael Martina reports on trade and politics for Reuters from Beijing.

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The deals are the first results of 100 days of trade talks that began last month, when a meeting between U.S. President Donald Trump and Chinese President Xi Jinping proved far more friendly than had been expected after last year’s U.S. presidential campaign, but the immediate impact was unclear.

“This will help us to bring down the deficit for sure,” U.S. Commerce Secretary Wilbur Ross said at media briefing in Washington. “You watch and you’ll see.”

The United States ran a trade deficit of $347 billion with China last year, U.S. Treasury figures show (all figures US$).

By July 16, the 100th day after the leaders’ meeting, China agreed to issue guidelines that would allow U.S.-owned card payment services “to begin the licensing process” in a sector where China’s UnionPay system has had a near monopoly.

China will also allow U.S. imports of beef no later than July 16, and the United States will issue a proposed rule to allow Chinese cooked poultry to enter U.S. markets.

Foreign-owned firms will also be able to provide credit rating services in China.

“We believe that Sino-U.S. economic cooperation is the trend of the times… We will continue to move forward,” Chinese Vice-Finance Minister Zhu Guangyao told a Beijing media briefing.

Trump had pledged during his presidential campaign that he would stop trade practices by China and other countries that he deemed unfair to the United States. His tough talk toward Beijing had fueled early fears of a trade war.

But Trump’s rhetoric toward China has softened in the past month, expressing admiration for Xi and saying he wanted Beijing to help deal with the North Korean nuclear threat.

Shortly after their meeting, Trump said he had told Xi that China would get a better trade deal if it worked to rein in North Korea. China is neighbouring North Korea’s lone major ally.

On Friday, when asked whether the trade talks with the U.S. were related to North Korea, Zhu said economic issues should not be politicized.

Uncertain benefits

But while the world’s two biggest economies agreed to take a number of steps by July 16, it was not clear how much these new deals would increase trade in the near term.

Ker Gibbs, the chairman of the American Chamber of Commerce in Shanghai, said the measures were a good beginning but not a breakthrough.

“Past foot-dragging means we won’t celebrate until these promises are executed,” Gibbs said, calling the opening in the electronic payments market “mainly symbolic”.

“This should have been done years ago when it would have made a difference. At this point, the domestic players are well entrenched so foreign companies will have a hard time entering the China market.”

China is the top export market for U.S. agriculture products, with the total value of exports rising by more than 1,100 per cent since 2000 to $21.412 billion in 2016, so beef sales are potentially lucrative for U.S. exporters.

China had conditionally lifted its longstanding import ban on American beef last year, but few purchases have been made. The ban was imposed in 2003 due to a case of bovine spongiform encephalopathy (BSE) in Washington state.

And U.S. credit card operators Visa and MasterCard have yet to be independently licensed to clear transactions in China, despite a 2012 WTO ruling mandating that Beijing open the sector and rules issued by the central bank to let foreign firms enter the market.

Visa said in an emailed statement it looked forward to submitting an application for a bank-card clearing institution license, which, “once granted,” would allow it to support economic development in China.

MasterCard welcomed the announcement, saying it looked forward “to having full and prompt market access in China.” The U.S. also signaled it was eager to export more liquefied natural gas, saying China could negotiate any type of contract, including long-term contracts, with U.S. suppliers.

For U.S. gas drillers, China provides a potential customer base beyond countries such as Japan and South Korea, where the long-term demand outlook is bleak due to mature economies, rising energy efficiency and falling populations.

Potential co-operation between the U.S. and China on LNG would not have any immediate impact on supplies, as China currently does not need new gas supplies and the U.S. is not yet able to deliver more.

Randal Phillips, Mintz Group’s Beijing-based managing partner for Asia, said that Washington was too focused on selling more to China and should instead seek to address structural imbalances created by Chinese industrial policies and barriers to investment.

“That’s going to be the challenge, and hopefully the Trump administration doesn’t start declaring victory,” he said.

— Reporting for Reuters by Ayesha Rascoe in Washington, Michael Martina, Kevin Yao and Matthew Miller in Beijing and John Ruwitch in Shanghai.

Factbox: Beef

China was the world’s second largest consumer (7.7 million tonnes) and importer (812,000 tonnes) of beef in 2016, behind the U.S.

China has purchased negligible amounts of U.S. beef products since imposing a ban in 2003 over BSE concerns.

Asia remains the top market for U.S. beef shipments, selling $3.77 billion worth of beef cuts to Asia in 2016, out of U.S. exporters’ total $6.34 billion. Japan ($1.51 billion) and South Korea ($1.06 billion) were the top buyers of U.S. beef exports.

Brazil was China’s top beef supplier in 2016, shipping $765.3 million dollars of frozen beef. Australia was the top fresh beef supplier (valued at $57.11 million).

Tyson Foods, Cargill and JBS are among the biggest exporters of U.S. meat.

Factbox: Poultry

China was the 21st largest market for U.S poultry exports in 2016, purchasing only $33 million out of a total $3.875 billion of U.S. poultry exports.

In 2014, the United States exported about $315 million worth of poultry products to China, including chicken feet, or paws, which are popular there.

China has banned U.S. poultry imports since the U.S. suffered its worst-ever outbreak of avian flu in 2015.

Tyson Foods, Pilgrim’s Pride and Sanderson Farms are the top three U.S. chicken producers.

(Sources: USDA, China Customs, USA Poultry and Egg Export Council.)

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