Canada 'caught in the crossfire' of US-China trade dispute

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Asian stocks remained under pressure on Thursday from fears of an escalation in the US-China trade war, while the dollar stood stall after rallying against its peers amid the turmoil in broader markets.

"In light of China's decision to respond to the investigation by imposing duties on USA goods, the Trade Representative proposes a modification of the action taken in this investigation".

Meanwhile, farmers hurt by Chinese tariffs on US agricultural exports pose a political risk for Mr. Trump and for Republicans, especially as the November midterm elections loom. "We can not turn a blind eye to China's mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy".

It also includes consumer goods ranging from vehicle tyres, furniture, wood products, handbags and suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 11, 2018.

The move comes just days after the U.S. and China imposed tit-for-tat tariffs of $34bn on the other countries' goods.

Senate Finance Committee chair Orrin Hatch (R-Utah) also took aim at the announced list, saying it "appears reckless and is not a targeted approach".

In Beijing, Li Chenggang, assistant minister at China's Commerce Ministry, said at a forum in Beijing that the latest U.S. proposals interfered with the globalisation of the world economy and that China's support for a multilateral trade system would not change.

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"As in the past, the United States is willing to engage in efforts that could lead to a resolution of our concerns about China's unfair trade practices and to China opening its market to USA goods and services", he said.

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.

"China has no option but to fight fire with fire".

The move would be the latest in the escalating trade skirmish between the world's two biggest economies.

The euro was flat at $1.1675 after shedding 0.6 per cent on Wednesday.

"It is now much more likely that the dispute will continue for a prolonged period of time and that we will see ratcheting up of protectionist measures", Elena Duggar, an associate managing director at credit rating agency Moody's, said in a research note after the Trump administration late Tuesday surprised investors by threatening to impose 10 percent tariffs on an additional $200 billion of Chinese goods.

The new list published on Tuesday targets many more consumer goods than those covered under the tariffs imposed last week, raising the direct threat to consumers and retail firms.

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