The U.S.-China trade war deepened Tuesday as Beijing announced retaliatory tariffs on $60 billion of U.S. goods and President Donald Trump's administration threatened duties on virtually all Chinese imports.
On Monday, Trump ordered his administration to levy 10 percent tariffs on about $200 billion in Chinese goods beginning next Monday and to increase the rate in January to 25 percent if Beijing refuses to offer trade concessions.
In retaliation, Beijing has announced plans to hit U.S. goods, ranging from wheat to textiles, with 5 percent to 10 percent tariffs.
Stocks shrugged off the latest ratcheting up of trade tensions. The calm reaction has some investors saying the markets had already priced in 10 percent tariffs and that it could have been worse.
The sides also indicated there could still be scope to reach a trade deal. The Chinese government is still willing to negotiate, the country's Finance Ministry said on Tuesday. Kevin Hassett, the chairman of Trump's Council of Economic Advisers, said he expects that U.S.-China talks can still take place.
Neither government has officially announced that trade negotiations will resume after Treasury Secretary Steve Mnuchin extended an invitation to his counterparts in Beijing earlier this month. "I'm hopeful that the talks happen next week," Hassett told MSNBC Television on Tuesday. "I've not heard they've been canceled."
Still, a solution to the trade conflict seems a long way off.
Trump on Monday said that the U.S. will immediately pursue additional tariffs on about $267 billion of Chinese imports if Beijing strikes back against American farmers and industry. Such a move would mean that roughly all U.S. imports of Chinese goods -- worth about $505 billion last year -- would be subjected to tariffs.
Trump doubled down on that threat Tuesday, vowing punitive measures against China if it targets politically potent U.S. agricultural products for retaliation.
"China has openly stated that they are actively trying to impact and change our election by attacking our farmers, ranchers and industrial workers because of their loyalty to me," Trump said on Twitter. "What China does not understand is that these people are great patriots."
Beijing's plans for tariffs on $60 billion of U.S. goods include an additional 5 percent duty on about 1,600 kinds of U.S. products including smaller aircraft, computers and textiles, and an extra 10 percent on more than 3,500 items including chemicals, meat, wheat, wine and liquefied natural gas. In a previous announcement from August, those products had faced extra tariffs of up to 25 percent.
The Trump administration's duties on $200 billion spared smartwatches and Bluetooth devices, bicycle helmets, high chairs, children's car seats and playpens. They were among 300 tariff lines that were removed from a preliminary list of targets for U.S. duties.
The Trump administration tailored its final list of Chinese targets to help ensure American consumers don't feel the pinch, Commerce Secretary Wilbur Ross said Tuesday.
"We were trying to do things that were least intrusive on the consumer," Ross said on CNBC. "We really went item by item trying to figure out what would accomplish the punitive purpose on China and yet with the least disruption in the U.S."
Some goods that are affected by the new U.S. tariffs are antennas and other electronic components, seafood, handbags, baseball gloves and thousands of additional items.
Trump is ratcheting up pressure on Beijing to motivate it to change its trade practices. Business leaders are warning the high-stakes strategy could upend their supply chains and raise costs, as economists worry Trump's tactics could derail the broadest global upswing in years.
Trump's tariff campaign is also dividing his advisers between hawks like U.S. Trade Representative Robert Lighthizer, who are determined to force sweeping changes to China's industrial policies, and Mnuchin, a former Wall Street banker who is seeking a trade deal.
China will reject new trade talks if Trump moves ahead with the $200 billion round of duties, throwing into doubt the prospect of a diplomatic breakthrough, two people familiar with the matter said this week.
China's responses have so far failed to thwart Trump's trade offensive, and with the White House amping up the fight again, Chinese leaders are not sure how to respond, people briefed on economic policymaking discussions say.
Chinese officials "are generally confused," said Raul Hinojosa-Ojeda, a trade specialist at the University of California, Los Angeles, who has been traveling around China speaking with officials, businessmen and workers.
"They don't know what to do," he added. "They worry that the tit-for-tat model is playing into Trump's hands."
China does not import nearly enough from the United States to target $200 billion in American goods -- let alone the additional $267 billion in Chinese goods that Trump has threatened to tax.
But China's leaders feel they cannot back down. They have presented the trade war as part of a broader effort by the United States to contain China's rise.
Trump has said as much, and did so again at a news conference on Tuesday. "China has been taking advantage of the United States for a long time, and that's not happening anymore," he said.
The Chinese public could see any effort to soothe tensions as capitulation. Some hard-liners want a more aggressive stance.
But China's leaders "don't really want to engage in a dollar-for-dollar retaliation," said Yu Yongding, a prominent economist at the Chinese Academy of Social Sciences. "Their purpose is to stop this trade war."
China's other options are limited.
It could punish American businesses that depend on China. Already, its antitrust officials have effectively killed the $44 billion effort by Qualcomm, the semiconductor company, to buy a Dutch chipmaker. China has also pledged to buy soybeans from other countries, but replacing voluminous American supplies will be difficult.
More drastic moves, like closing factories or encouraging consumer boycotts of American goods, could eliminate Chinese jobs. They could also permanently damage China's reputation as a place to do business and only accelerate corporate plans to look to other countries.
China could also guide its currency to a weaker level against the dollar. It has already nudged the currency a bit lower, making Chinese goods cheaper in the United States and partly offsetting the tariffs. But a weaker currency would make China's imports more expensive, raise the risk of inflation and lead to a potentially damaging flight of money out of the country. It could also provoke further U.S. retaliation.
For officials in Beijing, the worry about Trump's latest tariffs isn't just the impact on trade: Rather it's the steady march toward a long-term competition that could thwart China's rise.
President Xi Jinping's government expects Trump to start using the U.S.' military, technological and financial advantage to pressure Beijing, according to one Chinese official.
"After levying tariffs on all Chinese imports, what can Trump do?" said the official, who asked not to be identified to speak about sensitive matters. "There will be systemic containment and suppression."
Despite Trump touting a personal "friendship" with Xi, U.S.-China relations have deteriorated on virtually every front under his presidency, from trade to cyber-security to geopolitical flashpoints like Taiwan and the South China Sea. The fear in Beijing is that Trump's main goal is to keep Beijing permanently in second place in a world dominated by the U.S.
"More and more in China's elite circle now think Trump's trade war is not just about fair trade and trade balance," said Zhang Baohui, director of the Centre for Asian Pacific Studies at Lingnan University in Hong Kong. "Rather, it is a containment program to change China's long-term power trajectory."
Information for this article was contributed by Enda Curran, Andrew Mayeda, Jenny Leonard, Jennifer Jacobs, Toluse Olorunnipa, Saleha Mohsin, Haze Fan, Yinan Zhao, Dandan Li, Miao Han, Xiaoqing Pi, Sarah Ponczek and Rich Miller of Bloomberg News; by Keith Bradsher of The New York Times; and by Christopher Rugaber of The Associated Press.
A Section on 09/19/2018