Trump hits China with tariff rise as trade war escalates
Donald Trump sharply escalated his trade war with Beijing on Friday, more than doubling tariffs on $200bn worth of Chinese imports as talks between China’s top negotiator and US officials failed to produce a breakthrough.
The US president’s decision to push ahead with a threat to increase tariffs from 10 per cent to 25 per cent sets the stage for a tense final day of negotiations between Liu He, China’s vice-premier, and Robert Lighthizer, the US trade representative, in Washington.
Mr Trump struck an optimistic tone in a series of tweets on Friday morning, describing the talks as proceeding in a “congenial manner” while adding “there is absolutely no need to rush”.
In a statement issued on Friday just after midday Beijing time, China’s commerce ministry said it “deeply regretted” the president’s move to carry through on the tariff threat and repeated its earlier vow to “take necessary countermeasures”.
But the ministry also expressed hope that a negotiated settlement could still be reached, citing Mr Liu’s discussions with Mr Lighthizer. “The 11th round of trade consultations is under way,” it said. “It is hoped the US and Chinese sides will meet each other halfway.”
Earlier in the day, Mr Liu told China Central Television that his decision to travel to Washington this week “under pressure” was a sign of China’s “sincerity”. “I think there is hope,” he added.
Mr Trump’s tariff move — following through on a threat he made on Sunday that has roiled global markets all week — comes a day after the talks failed to offer any signs of concrete progress.
“This evening, Ambassador Lighthizer and [Treasury] Secretary [Steven] Mnuchin met with President Trump to discuss the ongoing trade negotiations with China. The ambassador and secretary then had a working dinner with Vice-Premier Liu He, and agreed to continue discussions tomorrow morning,” the White House said on Thursday evening.
Earlier in the day, Mr Trump had said he expected to speak “soon” with Xi Jinping, China’s president, but there was no evidence of a call as the deadline for the tariff increase, set for 12.01am eastern time on Friday, approached.
Mr Trump had earlier sought to ease investor concerns by saying that he had received a “beautiful letter” from Mr Xi this week, in which the Chinese president urged the two countries to “work together” to resolve their dispute.
But the US president’s vowed to press ahead with the higher levies and accusations that Beijing had walked back commitments in the negotiations.
The higher US duties will only apply to Chinese goods shipped from Friday onwards — and not on products already en route to or in US ports. As most trade between the world’s two largest economies is transported across the Pacific by ship, that gives both sides a crucial two to four additional weeks to negotiate a settlement.
Chinese stocks finished higher despite the impasse. China’s CSI 300 index of major stocks listed in Shanghai and Shenzhen closed up 3.6 per cent, while Hong Kong’s Hang Seng index was 1 per cent higher. China’s onshore renminbi, which is permitted to trade within 2 per cent on either side of a daily midpoint set by China’s central bank, strengthened 0.3 per cent against the dollar.
The US president first imposed a punitive tariff of 25 per cent on $50bn worth of Chinese industrial exports in July last year. That was followed in September by the imposition of a 10 per cent tariff on a much broader range of goods worth about $200bn annually, which will now be raised to 25 per cent. In addition, Mr Trump said the US would start the “paperwork” to apply a 25 per cent rate on all remaining Chinese imports, worth $325bn.
“I happen to think that tariffs for our country are very powerful,” Mr Trump said. Despite the bluster, one senior financial services executive believes that the Trump administration is still determined to seal an agreement. “If they don’t do a deal now, the markets are not going to take that kindly — they will definitely see the ongoing lingering conflict as a reason to have doubt and fuel volatility,” the person said. “[The Trump administration] doesn’t need this China thing hanging out there. They need this China thing to be a victory, to take it off the table and move on to other things.”
However, other observers believe that the breakdown in trust over the past week has been so severe that it will be difficult to agree to a deal within short order.
US officials and people briefed on the talks said China suddenly informed Washington last week that it was no longer prepared to make specific legally binding commitments to protect US intellectual property. They said that Beijing reeled back promises in other areas too, which Mr Mnuchin labelled a big change in “direction”.
There are other issues that still need to be resolved as well, particularly how quickly levies might be lifted in the event of a deal. The US wants them preserved to ensure Chinese compliance, while Beijing wants them eliminated as rapidly as possible.
US businesses have been watching the deterioration in the trade talks anxiously, amid fears that their costs are bound to rise and they will have to pass on some of the pain of higher tariffs to consumers. One of the hardest hit sectors from the trade war is US agriculture, which has been adversely affected by retaliatory tariffs from Beijing.
The Trump administration last year passed a $12bn rescue package to help farmers affected by the trade fight and had previously ruled out new assistance this year. But during a visit to Minnesota on Thursday, Mike Pence, the US vice-president, said a new aid package was being discussed at the White House.
Mr Trump said on Friday morning that the money taken in from Chinese tariffs would be used to “buy agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance.”
“In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!” he added.
As he prepared to impose a new round of tariffs on Chinese imports, Mr Trump held a phone call with Justin Trudeau, the Canadian prime minister, that included a discussion of the talks between Washington and Beijing.
According to the White House, Mr Trump said he would stand by Canada in its bid to “secure the fair treatment” of its citizens detained in China in recent months in apparent retaliation for the arrest in Vancouver last year of Meng Wanzhou, chief financial officer of Huawei, the telecommunications company, on a US extradition request.
James Politi in Washington, Tom Mitchell and Nian Liu in Beijing, and Hudson Lockett and Siddarth Shrikanth in Hong Kong