The escalating confrontation between Washington and Beijing inched closer to all-out trade war on Wednesday after China threatened retaliation against key US exports, sending global stocks lower initially.

Beijing unveiled plans for painful import duties targeting politically-sensitive US exports, including soybeans, aircraft and autos, to retaliate against looming US tariffs on more than 1,000 Chinese goods worth about $50 billion.

Wall Street opened sharply lower but closed with solid gains after investors decided their fears might be overblown.

President Donald Trump's newly-installed economic advisor Larry Kudlow said the stock market anxiety was understandable but "at the end of the rainbow, there's a pot of gold."

Kudlow is well known to financial markets after many years as an analyst on CNBC.

US President Donald Trump meanwhile unleashed a tweet storm, emphatically stating the United States was "not in a trade war with China" and implying he was simply fixing the mistakes of previous administrations.

Commerce Secretary Wilbur Ross dismissed fears the trade confrontation could endanger the world's largest economies.

Ross, in an interview with CNBC, downplayed Beijing's retaliation, saying the $50 billion in US exports targeted for sanctions only amounted to about 0.3 percent of US GDP.

"So it's hardly a life-threatening activity," he said.

But some US markets already have responded to the trade spat with higher prices and tighter supplies even though the largest of the retaliatory duties have yet to take effect.

Steel and aluminum suppliers began raising prices within 24 hours of Trump announcement last month of his intention to hit the metals with steep import tariffs, according to the Institute for Supply Management.

Industry groups renewed calls for the White House to change tack.

The powerful US Chamber of Commerce, a stalwart supporter of Republican lawmakers, said tariffs were "not the way" to achieve fairer trade with China.

And aviation giant Boeing, which could see some of its smaller planes impacted by China's tariffs as well as facing higher metals costs, said both sides could "do harm to the global aerospace industry."

The company said it "will continue to engage both governments" as the sides note that "productive talks are ongoing."

- Will Trump blink first? -

China is the largest market for US soy and the threat of tariffs on exports of the commodity has the potential to whip up trade anxieties in stalwart Republican areas.

The American Soybean Association called on the Trump administration "to reconsider the tariffs that led to this retaliation."

Scott Miller, a trade policy expert at the Center for Strategic and International Studies, told AFP the tariffs proposed so far were unlikely to dent overall economic growth.

But that "does not mean there isn't going to be a political backlash," he said.

"I think China is perfectly happy to play a game of chicken with the United States on this because they believe the US will blink first."

But a US trade official told reporters the China's retaliation is "simply an effort to intimidate us or to get us to back down so that they can continue doing all the bad things" including taking intellectual property from American companies.

Other than steel and aluminum, the tariffs are only threat at this point: the US will have a 30-day comment period before determining the final list of Chinese goods on the hit list, and China also is holding off pending talks.

Should the tariffs go into effect, however, they would make for one of the largest trade wars ever involving the United States, said Gary Clyde Hufbauer, a trade expert at the Peterson Institute for International Economics.

The amount $50 billion "in each direction is far larger than previous trade spats that we've had," he told AFP.

But Hufbauer said as November's mid-term elections approach, the political ramifications of the current trade policy could be greater than the economic ones for Trump.

"He's hurting his base, he's really annoyed a lot of Republicans in the senate and the house," said Hufbauer.

"The way he's going now, he's got to compromise out to have a chance of keeping the Congress Republican in November."

Timeline of a month of escalating US-China trade tensions
Washington (AFP) April 4, 2018 - Trade tensions between the United States and China have been escalating over the past month, following President Donald Trump's decision to impose steep tariffs on steel and aluminum imports.

Here are the main dates in the conflict between the world's two largest economic powers:

- March 8 -

US President Donald Trump signs the order to impose tariffs of 25 percent on steel imports and 10 percent on aluminum citing national security concerns.

The goal was to address China's overproduction, but the measures also would hit allies, prompting the European Union to threaten retaliation. The administration later exempted the EU, Canada, Mexico and four other economies from the duties.

- March 22 -

The Trump administration announces punitive tariffs on about $50 billion in Chinese goods in retaliation for what it says has been the massive theft of intellectual property from American companies.

Trump gives US Trade Representative Robert Lighthizer 15 days to draw up a list of products to target, which Lighthizer said would be drawn from the goods Beijing has said it wants to dominate.

- March 23 -

In retaliation for the US tariffs on steel and aluminum, Beijing hits back with a list of 128 products which will face duties of 15-25 percent in the event negotiations with Washington fail to resolve the dispute.

Among them are fresh fruit, pork and recycled aluminum, which accounted for $3 billion of US exports last year. Economists say this response was measured, since it does not affect the main Chinese imports from the US.

- March 26 -

Chinese authorities urge the United States to stop its "economic intimidation" and threatens further retaliation.

- April 2 -

China's rolls out punitive measures against the 128 US products in response to steel and aluminum duties. Fruit, pork and California wine are on the hit list.

- April 3 -

In response to the March 22 presidential order, USTR publishes the provisional list of imports that would be subject to new duties in retaliation for "the forced transfer of American technology and intellectual property."

This list, which targets imports representing approximately $50 billion, targets products from various sectors including aeronautics, information and communication technologies, and robotics and machinery.

- April 4 -

A few hours after the publication of the US target list, Beijing responds with a list of $50 billion of US goods that will be hit with retaliation, this time including key exports: aircraft, auto and soybeans.

Trump responded in a tweet, saying, "We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US."

The trade deficit with China rose to $337 billion in 2017, but Trump likes to ignore the dominant US services sector and focus only on the deficit in goods alone, which was $375 billion last year although he uses a higher figure.

"Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!"

He concluded the tweet storm saying, "When you're already $500 Billion DOWN, you can't lose!"

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China slaps retaliatory tariffs on 128 US imports
Beijing (AFP) April 2, 2018
China on Monday imposed new tariffs on 128 US imports worth $3 billion, including fruits and pork, in retaliation to US duties on steel and aluminium, fuelling fears of a trade war. Beijing's move, which the Xinhua news agency said was decided by the custom tariffs commission of the State Council, follows weeks of heated rhetoric and threats between the world's two biggest economies. President Donald Trump has repeatedly railed against China's massive trade surplus over the United States, promis ... read more