Trump prepares to escalate trade war
WASHINGTON — The United States and China traded blows on Monday in the latest escalation of their tariff war, unnerving Wall Street and threatening to draw American consumers into the fray for the first time.
Both nations, which just days earlier had anticipated sealing a comprehensive commercial deal, instead took steps to raise new trade barriers. In Beijing, the Chinese government announced plans to impose tariffs on $60 billion worth of American products in retaliation for U.S. tariffs that President Donald Trump in
creased on Friday.
Trump, meanwhile, began the process of expanding U.S. tariffs to cover all $540 billion in Chinese imports — a potentially seismic jolt to the global economy that is expected to raise prices for such products as cell phones, sunglasses, cameras and TVs.
“There will be price hikes at Target, Costco, Home Depot and Walmart,” said Nelson Dong, a partner with Dorsey & Whitney in Seattle. “The importers are going to pass on some or all of the tariff to the consumer and that will become much more readily apparent and harder to mask.”
With hopes fading for an early resolution of the yearlong U.S.China trade dispute, the president said he would meet Chinese President Xi Jinping at the G20 leaders summit in Osaka, Japan, on June 28-29. Treasury Secretary Steven Mnuchin told CNBC that the two sides remained in “ongoing” negotiations.
“I love the position we’re in,” the president told reporters.
Investors were less impressed, sending the stock market to its worst one-day performance in months. The Dow Jones industrial average, which was down 719 points at its low, ended the day down more than 617 points or 2.4% to close at 25,324.99. All 30 Dow stocks lost ground.
During an early afternoon appearance in the Oval Office with Hungarian Prime Minister Victor Orban, Trump appeared unfazed by the market jitters.
He boasted incorrectly that the federal government is collecting “hundreds of billions of dollars” in tariff revenue and said he planned to use $15 billion of that amount to bail out farmers suffering from lost sales to China.
“Our farmers will be very happy. Our manufacturers will be very happy. Our government will be very happy,” Trump said. “It’s working out very well.”
In fact, the Treasury Department has collected $39 billion in customs duties over the first seven months of the current fiscal year, roughly $18 billion more than in the same period one year earlier.
Industry groups also proved hostile to the president’s latest action. Most industries have cheered the president for confronting China over its pilfering of trade secrets and market-distorting policies. But executives have grown increasingly restive as the tariff toll has mounted.
“This is a self-inflicted wound that will be catastrophic for the nation’s economy,” said Rick Helfenbein, president and CEO of the American Apparel & Footwear Association. “By tightening the noose and pulling more consumer items into the trade war, the President has shown that he is not concerned with raising taxes on American families, or threatening millions of American jobs ... dependent on global value chains.”
Shortly after the Chinese Finance Ministry announced the retaliatory tariffs, an anchorman for state television read an official government commentary in a live prime-time segment.
“If we discuss, our door is always wide open; if we fight, we’ll fight to the last,” CCTV anchorman Kang Hui said. “The U.S.initiated trade war with China is just a hurdle in China’s development process. It is no big deal. China must strengthen its confidence, overcome difficulties, turn crisis into opportunity, and fight to create a new world.”
That tariff increase to 25% from 10% took effect on Friday. The tariffs Trump set in motion on Monday would hit an additional roughly $300 billion in imports, leaving almost no products from China entering the United States without incurring a tax.
Trump frequently claims that the Chinese are paying the tariffs, insisting in a tweet on Monday “there is no reason for the U.S. consumer to pay the tariffs.”
Trump’s tariff comments clashed with those of National Economic Council Director Larry Kudlow, who acknowledged on “Fox News Sunday” that Americans will suffer.
“In fact, both sides will pay. Both sides will pay in these things,” Kudlow said.
The president is encouraging companies to relocate production from China to the U.S. or another country like Vietnam, which is not affected by the new tariffs. But switching suppliers is costly and time-consuming, say some business leaders, who fear the administration’s goal is to unravel the commercial links between the U.S. and China.