WASHINGTON -- President Donald Trump unexpectedly announced Thursday that next month he will impose new 10% tariffs on $300 billion worth of Chinese imports, effectively taxing every product that Americans buy from China.
The new import taxes will be imposed Sept. 1 on a long list of goods expected to include smartphones, laptop computers and children's clothing. They will come on top of the 25% duty in place already on some $250 billion in Chinese goods.
The move marks the biggest escalation so far taken by the Trump administration and brings a surprise end to a truce that had been in place since the president met Xi Jinping, his Chinese counterpart, in Osaka at the end of June.
Stocks fell sharply as investors digested the latest tariff salvo with the Dow Jones industrial average shedding about 300 points within minutes.
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China's Embassy in Washington did not immediately respond to an email seeking comment.
Trump in a series of tweets announcing the new tariffs left the door open to further talks. "We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!" he said. Later, speaking to reporters as he departed the White House for a campaign rally, he complained that Xi isn't "going fast enough."
Both China and the U.S. said after this week's talks that their negotiators would regroup in Washington in early September. People close to the administration said they were still planning for those talks to go ahead.
In a tweet announcing the tariff move, Trump said China had not lived up to a promise Xi made in Osaka, Japan, to buy U.S. agricultural goods and to halt illegal exports of fentanyl, a dangerous opioid. "Many Americans continue to die," Trump tweeted. The president later told reporters he's "not concerned at all" about the negative reaction from markets.
Six people familiar with the discussions said that during meetings with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin in Shanghai earlier this week the Chinese side had also made no new proposals. That had left unclear the way out of an impasse over the substance of a deal the two sides hit in May, which prompted the administration at a White House meeting Thursday to decide to increase pressure on Beijing.
White House officials in recent days had appeared satisfied with the slow pace of the China talks. Trump said last week and this week that China likely wouldn't agree to a trade deal until after the 2020 elections, in part because it would want to see whether he was re-elected.
In a Tuesday tweet, he wrote that he would be much tougher with China if China waited until after the election, and he raised the possibility that he might never agree to a deal.
"Tariff Man is alive and well," said Michael Pillsbury, a China scholar at the Hudson Institute, who advises Trump.
Pillsbury said Trump was insulted by comments he viewed as critical of the United States that were made recently by a spokesman for the Chinese Foreign Ministry. Pillsbury said officials from China had miscalculated their belief that Trump had lost his appetite for the trade war.
White House officials had hoped that the Federal Reserve this year would spur economic growth with a series of interest rate cuts, and some were disappointed by mixed signals Wednesday from the central bank.
Fed Reserve Chairman Jerome Powell on Wednesday cited the risk of escalating trade tensions as a major one for the U.S. economy as the Fed cut rates by a quarter-point, mentioning the word trade 26 times in his news conference.
The tariff move drew an immediate angry response from a U.S. business community that has been pushing for Trump to end a trade war that they see as increasingly weighing on the U.S. and global economies.
"Raising tariffs by 10% on an additional $300 billion worth of imports from China will only inflict greater pain on American businesses, farmers, workers and consumers, and undermine an otherwise strong U.S. economy," said Myron Brilliant, head of international affairs at the U.S. Chamber of Commerce.
A draft list of $300 billion worth of targets published by the Trump administration as talks started to break down in May included a raft of consumer and technology goods. They included most of Apple Inc.'s major products such as the iPhone, along with toys, footwear and clothing. The final list hasn't 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."
In an interview with BBC, Gary Cohn, former National Economic Council director, said "everyone loses in a trade war." Constant uncertainty about tariffs stops businesses from investing, he said, while the import levies drive up the cost of importing crucial products from China, negating the intended benefits of Trump's tax cuts.
"When you build plant equipment, you're buying steel, you're buying aluminum, you're buying imported products and then we put tariffs on those, so literally the tax incentive we gave you with one hand was taken away with the other hand," Cohn said.
Victor Shih, a China expert at the University of California San Diego, said if the tariffs were imposed as threatened Beijing would find new ways to respond.
"If this were to go into effect, China almost certainly will retaliate in some fashion," Shih said. "The soft delays and suspension in purchasing Boeing aircraft may harden into official policy. Also, China may impose fines and restrictions over services vendors with large presence in Greater China."
For more than a year, negotiators from the United States and China have been shuttling back and forth to discuss a trade agreement that Trump has described as potentially the largest transaction in history. The United States has been pushing China to open its markets to American businesses, respect American intellectual property, buy more American agricultural products and stop manipulating its currency. After an agreement appeared close last spring, talks collapsed.
Trump and Xi agreed to restart negotiations after meeting at the Group of 20 summit in Japan in late June. Trump said he would postpone tariffs on another $300 billion worth of imports and allow American companies to continue selling some technology to a Chinese telecom giant, Huawei, that had been placed on a government blacklist.
In return, Trump said China agreed to "immediately" begin buying American farm products, like soybeans. But those purchases have yet to happen.
China says it has been preparing to make agricultural purchases, and on Sunday the state-run Xinhua news agency reported that millions of tons of American soybeans had been shipped to China.
But elsewhere, Chinese officials have continued to insist that they are not making purchases as a condition of the talks.
On Wednesday, Xinhua characterized China's agreement to buy more American farm products as being "according to its own domestic needs and favorable conditions to be offered by the U.S. side for the purchase."
Information for this article was contributed by Shawn Donnan, Jenny Leonard, David Wainer, Mike Dorning, Jennifer A. Dlouhy and Mark Niquette of Bloomberg News; by David J. Lynch, Heather Long and Damian Paletta of The Washington Post; and by Alan Rappeport of The New York Times.
A Section on 08/02/2019