The first shots of a potential trade war have been fired. What’s next for Beijing?

The first return volley in a new trade clash between China and the United States was fired on Monday as Beijing’s tariffs on nearly $14 billion in US imports came into effect.

The first return volley in a new trade clash between China and the United States was fired on Monday as Beijing’s tariffs on nearly $14 billion in US imports came into effect. Those tariffs – which covered duties on crude oil, liquified natural gas and some machinery and vehicles – began less than a week after US President Donald Trump imposed blanket 10% duties on the hundreds of billions in goods that the US imports from China every year. There were hopes that a phone call between Trump and Chinese leader Xi Jinping last week could have avoided an escalation in hostilities, which could lead to a broader trade war. But that conversation never materialized. Now the question for both sides is what happens next. And how far each of the world’s two largest economies is willing to strain their deeply integrated commercial and trade ties. So far, even with the opening salvo discharged, both sides appear to be leaving breathing room for a potential deal. “Beijing has been restrained in its response to the new Trump tariffs. Both because the impact on China is modest, and because Xi wants to leave room to negotiate with Trump,” said Andy Rothman, CEO of advisory group Sinology.