U.S. President Donald Trump speaks during the introduction of Supreme Court nominee judge Brett Kavanaugh in the East Room of the White House in Washington, U.S., July 9, 2018. REUTERS/Leah Millis

HONG KONG, WASHINGTON (Reuters Breakingviews) - Enter the trade war corporate welfare state. As China and the United States ratchet up tariffs, politicians are trying to reassure anxious executives with talk of targeted exemptions and subsidies. That just leads to unhealthy and lasting government influence over industry.

The U.S. Trade Representative on Tuesday rolled out a fresh $200 billion list of Chinese goods, from cigarettes to salmon, that could get hit by a 10 percent tariff. Stock indexes in Shanghai and Shenzhen took another downward turn. Although listed local companies generate most of their revenue from domestic demand, much is still derived from the country’s massive export sector.

Chinese firms also import American components, which are set to become more expensive at best, unavailable at worse. Disentangling supply chains will take years, and substitutes aren’t always available. Given the size of the two economies, finding new markets for commodities like soybeans and chicken parts is equally difficult.

All of this presents a quandary for Presidents Donald Trump and Xi Jinping, both of whom want to be seen as munificent job creators. Bureaucracies on both sides of the Pacific are moving swiftly to pad the impact.

The U.S. Commerce Department had processed fewer than 100 of some 20,000 requests for exemptions from steel and aluminium tariffs as of last month, said Wilbur Ross, who runs the agency. American trade officials just kicked off a similar mechanism and could see tens of thousands of companies queue up. Both the United States and China are also considering handouts for sensitive industries like farming.

They already exist in both countries to varying degrees. The People’s Republic has backstopped inefficient industries like steel. A June editorial in state-owned tabloid the Global Times said China could offer export subsidies to cushion tariffs, plus provide additional “policy support,” usually code for ordering state banks to provide cheap corporate credit and roll over maturing debt.

The U.S. government meanwhile props up commodities such as sugar while states offer lavish tax breaks to attract enterprise, as Amazon is learning as it seeks a home for a second headquarters. More of this sort of thing will only mean that market forces wind up a casualty of war.