U.S., China turn up heat on massive trade dispute

WASHINGTON — Unwilling to yield, U.S. President Donald Trump and China’s government escalated their trade clash Friday, with Beijing vowing to “counterattack with great strength” if Trump follows through on threats to impose tariffs on an additional $100 billion US in Chinese goods.

Trump made his out-of-the-blue move when China threatened to retaliate for the first round of tariffs planned by the United States. But for someone who has long fashioned himself as a master negotiator, Trump left it unclear whether he was bluffing or willing to enter a protracted trade war pitting the world’s two biggest economies against each other, with steep consequences for consumers, businesses and an already shaken stock market.

“They aren’t going to bully him into backing down,” said Stephen Moore, a former Trump campaign adviser who is now a visiting fellow at the Heritage Foundation. He said the Chinese “are going to have to make concessions — period.”

The White House sent mixed signals on Friday as financial markets slid from investor concern about a significant trade fight. Treasury Secretary Steven Mnuchin told CNBC he was “cautiously optimistic” that the U.S. and China could reach an agreement before any tariffs are implemented but added, “there is the potential of a trade war.”

White House economic adviser Larry Kudlow told reporters the U.S. was “not in a trade war,” adding, “China is the problem. Blame China, not Trump.”

Trump’s latest proposal intensified what was already shaping up to be the biggest trade battle for more than a half century. The U.S. bought more than $500 billion US in goods from China last year and now is planning or considering penalties on $150 billion US of those imports. The U.S. sold about $130 billion US in goods to China in 2017 and faces a potentially devastating hit to its market there if China responds in kind.

Global financial markets have fallen sharply as the world’s two biggest economies squared off — the Dow Jones industrial average sank 572 points Friday.

Trump told advisers Thursday he was unhappy with China’s decision to tax $50 billion US in American products, including soybeans and small aircraft, in response to a U.S. move this week to impose tariffs on $50 billion US in Chinese goods.

Rather than waiting weeks for the U.S. tariffs to be implemented, Trump backed a plan by Robert Lighthizer, his trade representative to seek the enhanced tariffs, upping the ante.