The US early on Friday increased its tariffs on $200 billion in Chinese goods to 25% from 10%, rattling financial markets already worried the 10-month trade war between the world’s two largest economies could spiral out of control.
The move, which is expected to lead China to retaliate, went into effect just hours after US trade representative Robert Lighthizer, US treasury secretary Steven Mnuchin and Chinese vice premier Liu He ended a first day of talks in Washington without a deal. They resumed negotiations on Friday morning.
In a series of morning tweets, Trump defended the tariff hike and said he was in “absolutely no rush" to finalize a deal, adding that the US economy would gain more from the levies than any agreement.
“Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind," Trump said in a tweet.
Despite Trump’s insistence that China will absorb the cost of the tariffs, US businesses will pay them and likely pass them on to consumers.
Global equities sagged after his comments. MSCI’s All-Country World Index, which tracks stocks across 47 countries, was down 0.8% in London. U.S. stock indexes, which have fallen sharply this week, opened lower again.
Trump, who has adopted protectionist policies as part of his “America First" agenda and railed against China for trade practices he labels unfair, said the trade talks, originally due to last two days, could drag on beyond this week.
“We will continue to negotiate with China in the hopes that they do not again try to redo deal!" said Trump, who has accused Beijing of reneging on commitments it made during months of negotiations.
Following the US tariff hike, China’s commerce ministry said it would take countermeasures but did not elaborate. The ministry said it “hopes the US can meet China halfway, make joint efforts, and resolve the issue through cooperation and consultation."
Under the latest US action, US Customs and Border Protection imposed a 25% duty on more than 5,700 categories of products leaving China after 12.01 am EDT on Friday.
Seaborne cargoes shipped from China before midnight were not subject to the new tax as long as they arrived in the US prior to 1 June. Those cargoes will be charged the original 10% rate.
“This delay might create an unofficial window during which the U.S. and China can continue to negotiate," investment bank Goldman Sachs wrote in a note, adding that it was a “somewhat positive sign" that talks were continuing.
Trump gave US importers less than five days notice about his decision to increase the rate on $200 billion worth of goods, which now matches the rate on a prior $50 billion category of Chinese machinery and technology goods.
He has also threatened to impose new tariffs on another $325 billion in Chinese imports.
Investors worry that an escalating trade war could further damage a slowing global economy. The higher tariffs could reduce US gross domestic product (GDP) by 0.3% and China’s by 0.8% in 2020, consultancy Oxford Economics said.
“There is no greater threat to world growth," French finance minister Bruno Le Maire said on Friday.
Many business groups have opposed the tariffs, saying they will be disastrous for companies and lead to higher prices for consumers across a range of products.
Gary Shapiro, chief executive of the Consumer Technology Association, said the tariffs would be paid by American consumers and businesses, not China, as Trump has claimed. “Our industry supports more than 18 million US jobs – but raising tariffs will be disastrous," Shapiro said.
It may take three or four months for American shoppers to feel the pinch but retailers will have little choice but to raise prices .
Michael Martina, Ryan Woo, Ben Blanchard and Kevin Yao in Beijing, and Xihao Jiang in Shanghai contributed to this story.