Donald Trump has intensified his trade war with China by imposing new import tariffs of $200bn on Chinese goods arriving in the US from next week.
The US president announced the tariffs in a statement, saying: “If China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267bn of additional imports.”
The US president blamed “unfair policies and practices” for the escalation.
Unlike previous tariffs which were aimed at businesses the latest round will directly hit thousands of consumer goods from luggage and electronics to housewares and foods, increasing costs.
“For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies. We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices.”
Asian shares fell and copper prices eased after the announcement. US stock futures also took a knock, with E-Minis for S&P 500 and the Dow Minis both down 0.2%.
However, analysts said the blow to the market was not as acute as it could have been, as investors had been expecting the move.
“Given that markets have been bracing for this tariff announcement, we expect a muted rather than dramatic sell-off in Asian equities and currencies today,” said Chang Wei Liang of Mizuho Bank.
China’s vice premier Liu He responded by convening a meeting in Beijing to discuss the extra tariffs, according to Bloomberg.
Fang Xinghai, a senior Chinese securities market official, said the US tariffs would not work as China has ample fiscal and monetary policy tools to cope with the impact.
The South China Morning Post reported that China would probably not send a trade delegation to Washington for fresh talks, citing an unidentified government source in Beijing. The report said China was reviewing its previous plans to send a delegation headed by Liu to the US next week. The source told the paper that Beijing has not yet made a final decision but that a show of “sufficient goodwill” was a precondition for the planned talks.
Earlier in the day, Trump used a post on Twitter to warn foreign countries they would face higher import tariffs should they fail to agree “fair” trade agreements with the US, in a move seen as a thinly veiled threat to China.
He tweeted: “Tariffs have put the US in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country – and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be ‘Tariffed!’”
Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country – and yet cost increases have thus far been almost unnoticeable. If countries will not make fair deals with us, they will be “Tariffed!”
— Donald J. Trump (@realDonaldTrump) September 17, 2018
Economists argue border tariffs are typically counterproductive because the higher costs are passed on to consumers.
American farmers, who have been broadly supportive of Trump, reacted with concern. Casey Guernsey, a seventh-generation farmer and a former Missouri state legislator and spokesman for Americans for Farmers & Families, said: “As trade tensions escalate, and our ability to sell our goods to major markets diminishes, we’re having to make long-term business decisions that could affect our farms for generations.”
rump believes the measures are having a positive impact on the US economy, adding in a separate Twitter post: “Our Steel Industry is the talk of the World. It has been given new life, and is thriving. Billions of Dollars is being spent on new plants all around the country!”
Trump slapped a 25% tariff on foreign steel imports this year, with exemptions for some nations.
The president has used the threat of higher border taxes to force countries to renegotiate their trading arrangements with the US, although economists fear the impact could lower both American and global economic growthwhile also unsettling business investment.
The US and China have already imposed additional tariffs on $50bn worth of each other’s goods in the intensifying trade standoff, which has rumbled on for months as Trump pledges to help create more manufacturing jobs.
He has criticised China for “unfair” trading practices including the theft of US companies’ intellectual property.
Analysts say the president seems keen on the next round of tariffs and the Chinese are rumoured to be balking at the next round of talks.
Brad Bechtel of the investment bank Jefferies said: “I still think he goes ‘all the way’ [with tariffs on China]. He has bipartisan support and the midterms are looming on the horizon, so he will keep pushing.”
Financial markets have been rattled in recent weeks as the trade conflict intensifies.
Reuters reported that the US treasury department invited senior Chinese officials to more talks designed to break the deadlock last week, although scepticism remains on both sides over the prospects of a breakthrough. China has warned that the escalation of the trade conflict is not in the interest of either country.