Washington — President Donald Trump abruptly escalated his trade war with China, announcing that he would impose a 10% tariff on $300bn in Chinese imports that are not yet subject to US duties, breaking a tentative ceasefire.
The new tariff will be imposed beginning September 1, Trump said in a tweet on Thursday. The 25% tariff already imposed on $250bn in Chinese goods will remain in place, he said.
A draft list of $300bn worth of targets published by the Trump administration in May included a raft of consumer and technology goods, including most of Apple’s major products such the IPhone, along with toys, footwear and clothing. The final list has not yet been released.
“These are the tariffs on many of the consumer goods that were spared in the previous tariff rounds,” said Neil Dutta, head of economics at Renaissance Macro Research in New York, in a note. “This is a small hit to growth but will likely be more obvious to consumers. Keep in mind that margins have come in somewhat already, not sure firms can simply eat the cost.”
Treasury secretary Steven Mnuchin and US trade representative Robert Lighthizer returned from talks with Chinese counterparts in Shanghai this week without reporting much progress. The sides both said they would meet again in early September in Washington for the next round of talks.
Stalled talks
Negotiations have been at an impasse since May after the US said the Chinese reneged on provisions of a tentative deal.
State-run Chinese media called the Shanghai talks “pragmatic”. The two sides confirmed they had discussed increasing Chinese imports of US agricultural products, which have fallen dramatically in 2019, and that they would meet again in September in Washington.
US stocks pared gains on the news, while yields on 10-year Treasuries fell to the lowest since 2016.
Trump and Chinese President Xi Jinping agreed to a ceasefire in their year-long trade war at the Group of 20 summit in Osaka, Japan in June in what the US said was an effort to get the talks back on track. But Trump said on Thursday that China failed to fulfil a handshake agreement with Xi to buy more US agricultural products.
Broken promises
Trump also said that Xi had not met a promise to crack down on US shipments of fentanyl, a dangerous opioid that has killed tens of thousands of Americans in recent years. “Many Americans continue to die,” Trump said in a tweet.
...buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die! Trade talks are continuing, and...
— Donald J. Trump (@realDonaldTrump) August 1, 2019
Just before Trump’s announcement, United Nations Secretary-General Antonio Guterres warned of “growing friction” between the world’s two largest economies.
Guterres said he feared the widening gulf between the US and China risked creating two competing global blocs, each with their own “dominant currency, trade and financial rules, their own internet and artificial intelligence strategy, and their own contradictory geopolitical and military views.”
With assistance from David Wainer
Bloomberg
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