Fears of trade war with China again hit markets
White House insists Beijing has more to lose
WASHINGTON — President Donald Trump’s threat to impose tariffs on almost every Chinese product that crosses into the United States sent stock markets tumbling Tuesday and drew condemnation from retailers, tech companies and manufacturers as the possibility of a damaging trade war with the world’s second-largest economy appeared increasingly likely.
The Trump administration remained unmoved by those concerns, with a top trade adviser, Peter Navarro, insisting that China has more to lose from a trade fight than the United States. He also declared that Trump would not allow Beijing to simply buy its way out of an economic dispute by promising to import more U.S. goods.
“President Trump has given China every chance to change its aggressive behavior,” Navarro said in a call with reporters Tuesday. “China does have much more to lose than we do.”
In threatening tariffs on as much as $450 billion worth of Chinese goods, the administration is betting that Beijing will blink first. It’s a risky gamble by a White House that appears ready to forgo diplomatic negotiations in favor of punishing tariffs that could pinch consumers and companies on both sides of the Pacific.
The approach has spooked companies, investors and markets, which are increasingly worried that the United States has no other strategy to resolve a stalemate with China over its trade practices. Several rounds of trade talks with top Chinese officials in Washington and Beijing produced little agreement, and no additional official negotiations are scheduled, administration officials said.
On Tuesday, Trump suggested he was ready for a fight, saying China would no longer take advantage of the United States.
“You see what’s happening with China,” he said during a speech in Washington before the National Federation of Independent Business. “We have no choice. This should have been done many years ago.”
The president added: “China has been taking out $500 billion a year out of our country and rebuilding China. I always say, ‘We have rebuilt China.’ They’ve taken so much. It’s time folks, it’s time. So we’re going to get smart, and we’re going to do it right. And we’re actually getting a lot of support, but we have to do something about it.”
Markets sank Tuesday in response to Trump’s announcement late Monday that his administration was preparing to go beyond his initial plan to impose tariffs on $50 billion of Chinese goods and tax $400 billion in Chinese products if China continued to retaliate against the United States.
The tit-for-tat had escalated rapidly, with the president announcing Friday that the administration would move ahead with imposing tariffs on $50 billion of Chinese goods on July 6. Beijing immediately responded that it would impose its own tariffs on $50 billion of U.S. products.
Trump’s threats are now nearly as large as the total value of goods that China sent to the United States last year, which was $505.6 billion.
The benchmark Dow Jones index, the S&P 500 and the techheavy Nasdaq composite all fell Tuesday, following stock markets in London, Paris, Hong Kong, Tokyo, Frankfurt, Germany and mainland China. Investors moved money into assets that are considered safe havens, like 10-year U.S. Treasury bonds and the Japanese yen.
Shares of Boeing and Caterpillar, which are among America’s leading exporters to China, fell sharply Tuesday, along with soybean futures. China is the world’s largest importer of soybeans, a key livestock feed, and prices dropped more than 7 percent at times during the morning before stabilizing in afternoon trading.
Soybean prices are at their lowest level in more than two years, creating a politically delicate issue for Trump, who has strong support from rural voters in farm states but whose trade policies have angered farmers and lawmakers who represent them.
Sen. Joni Ernst, R-Iowa, said in a statement, “These aggressive trade actions will continue to have damaging consequences, including an impact on our commodity prices and farm futures, and increasing anxiety among the agricultural and business communities in Iowa.”
But Navarro, who is among Trump’s most strident anti-China advisers, dismissed those concerns, saying the United States had no choice but to hit China with tariffs to protect American workers. He said the White House had given China numerous opportunities to negotiate and alter policies that have cost Americans millions of jobs, and that the Trump administration was now prepared to impose tariffs on $450 billion of Chinese goods to force Beijing to bend.
“I think that the other side may have underestimated the strong resolve of President Donald J. Trump,” Navarro said. “If they thought that they could buy us off cheap with a few extra products and allow them to continue to steal our intellectual property and crown jewels, that was a miscalculation. We hope going forward there are no more miscalculations.”
There is broad agreement that China has engaged in unfair trade practices that have hurt U.S. companies. But Trump’s resort to tariffs as his primary negotiating tool has prompted swift condemnation from retail, technology and manufacturing companies, who said the approach could hurt American consumers and companies more than the White House realized.
Jose Castaneda, spokesman for the Information Technology Industry Council, called the escalation of trade tensions with China “irresponsible and counterproductive.”