China warns of ‘justified and necessary response’ as US tariff threat looms

President Donald Trump is expected to finalise a US decision to slap heavy tariffs on imported steel and aluminum, raising the spectre of a full-blown trade war that could hurt both friends and foes of America.

President Trump is expected to establish tariffs of 25 per cent on imported steel and 10 per cent on imported aluminium this week, according to White House sources.

The White House on Wednesday said President Trump would press ahead with controversial tariffs on steel and aluminum by the end of this week, but confirmed that select trade partners, including Mexico and Canada, could get carve-outs exempting them from the trade penalties.

China, the main target of Trump's tariff action, said it would make ''justified and necessary response'' in the event of a trade war with the United States. Foreign minister Wang Yi said on Thursday that such a war would harm all sides.

White House Press Secretary Sarah Huckabee Sanders said the decision is based on "national security," and that it's possible other countries could receive the exemptions as well. Those choices would be made on "a case-by-case, country-by-country" basis, she added.

The initiative comes after commerce secretary Wilbur Ross released a report declaring that current levels of steel and aluminum imports threatened national security and recommending tariffs and quotas on imports to protect the industries at home.

Under Section 232 of the 1962 Trade Expansion Act, the White House can take action to confront such threats, but it's been invoked only rarely to confront oil crises in the '70s and '80s.

The imposition of countervailing duties on imported steel and aluminium would offer immediate benefits to US steel and aluminum companies, which will now be able to sell their product at cheaper prices in the US vis-à-vis foreign competitors. US Steel announced it would send 500 idled workers to an Illinois plant in response to Trump's plan.

US steel makers have long complained that overproduction of steel in China as undermined local industry, and, according to the Commerce Department, it is also "by far" the largest contributor toward 700 million tonnes of excess steel capacity worldwide.

While China represents only a small fraction of steel imports to America, US steel companies say China and other cheap producers of steel distort the global market by subsidising cheap steel in order to build up their industry at home and muscle out rivals abroad.

The move has unsettled stock markets and unnerved political leaders with Republican House Speaker Paul Ryan criticizing the tariffs and Democrats like Sen Sherrod Brown talking them up.

Trump's top economic adviser Gary Cohn, who reportedly opposed the tariffs, resigned over the issue.

The new tariffs, if pushed through, will impact the American economy badly and could touch off a trade war with other countries.