Escalation in Trump tariffs looms over US-China trade talks
WASHINGTON — President Trump escalated his trade war with China on Friday morning, raising tariffs on $200 billion worth of Chinese goods and taking steps to tax nearly all of China’s imports as punishment for what he said was Beijing’s attempt to “renegotiate” a trade deal.
Trump’s decision to proceed with the tariff increase came after a pivotal round of trade talks in Washington on Thursday night failed to produce an agreement. The White House said talks would resume on Friday, but it remains uncertain whether the two sides can bridge the differences that have arisen over the past week.
In comments at the White House on Thursday afternoon, Trump vacillated between threatening China and suggesting a deal could still happen. The president said he had received a “beautiful letter” from President Xi Jinping of China and would probably speak to him by phone, but added he was happy to keep hitting Beijing with tariffs.
“I have no idea what’s going to happen,” he said. “They’ll see what they can do, but our alternative is, is an excellent one,” Trump added, noting that American tariffs on $250 billion worth of Chinese products were bringing “billions” in to the US government.
After the imposition of the new tariffs, China immediately said in a statement it is forced to retaliate, but didn’t specify how.
The renewed brinkmanship has plunged the world’s two largest economies back into a trade war that had seemed on the cusp of ending. The United States and China were nearing a trade deal that would lift tariffs, open the Chinese market to US companies and strengthen China’s intellectual property protections. But discussions fell apart last weekend, when China called for substantial changes to the negotiating text that both countries had been using as a blueprint for a sweeping pact.
Stock markets fell Thursday in the United States, but pared some of those losses after Trump’s comments in the afternoon. The S&P 500 ended the day down less than 0.5%.
On Sunday, Trump, angered by what he viewed as an act of defiance, had responded by threatening to raise existing tariffs to 25 percent and impose new ones on an additional $325 billion worth of products. China has said it is prepared to retaliate should those tariffs go into effect.
“We were getting very close to a deal then they started to renegotiate the deal,” Trump said. “We can’t have that.”
It remains unclear whether the talks can get back on track. An administration official described Xi’s letter to Trump as conveying a nice, diplomatic tone but noted that the word “equality” was included, suggesting that China believes the United States is demanding too much and that a trade agreement must be more equitable. Xi also said he believed that his friendship with Trump would endure the trade dispute.
Despite the overture, the administration official said this round of talks had the dour feeling of heading toward a breakup. There is a growing sense of disappointment in Xi being unable to follow through on concerns that Trump’s trade negotiators thought had been addressed.
Talks resumed at 5 p.m. Thursday at the offices of the US trade representative. Steven Mnuchin, the Treasury secretary, and Robert Lighthizer, Trump’s top trade negotiator, were heading the US team and Liu He, China’s vice premier, led the Chinese delegation.
The new tariffs would hit only products that leave China as of May 10, not those already in transit. That could provide some additional time for the two sides to reach an agreement. Trump could also rescind the tariffs once a deal is reached, retroactively reversing the higher rates.
“This week is really a challenge if you’ve got boats on the ocean,” said Brian Keare, the field chief information officer at Incorta, who advises companies on scenario planning amid the uncertainty they face under the Trump administration. “If I’ve got 30 days’ notice, I can make a smarter decision. If I’ve got 72 hours, my hands are more tied.”
China, which has already placed tariffs on nearly all of US exports, including agriculture products, has threatened to respond with additional “countermeasures” once the 25 percent rate kicks in.
Trump, already emboldened by a healthy US economy, may be encouraged to keep his trade war going, given the monthly trade deficit with China fell in March to its lowest level since 2014.