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Trump doubles tariffs on $200 billion of Chinese imports, escalating U.S.-China trade war
By David J. Lynch and
Cargo ships berth at a port in Qingdao, China, on May 8. (AFP/Getty Images)
United States and China hurtled toward a defining moment in their
four-decade-old relationship, with financial markets bracing for the
outcome of unusually dramatic trade talks in Washington.
met into the evening on Thursday but failed to avert an increase in
U.S. tariffs on $200 billion in Chinese products that took effect at
12:01 a.m. Friday. The two sides have agreed to continue negotiations
Robert E. Lighthizer, the chief U.S.
trade negotiator, 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,” the White House said in a
In Beijing, the Commerce Ministry
said China “deeply regrets” the decision to increase the tariffs and
“will have to take necessary countermeasures.”
hope that the U.S. and China will meet each other halfway and make
joint efforts to solve the existing problems through cooperation and
consultation,” a spokesman said in a statement.
the higher tariffs apply only to goods that leave China on Friday — not
shipments already approaching American shores — officials still have
time to work out a last-minute solution.
matter what happens at the bargaining table, relations between the
world’s two largest economies, accounting for roughly 40 percent of
global output, appear certain to change.
really determined to go in a different direction,” said Timothy
Stratford, chairman of the American Chamber of Commerce in China and a
former U.S. diplomat in Beijing. “The U.S. is recalibrating its policy
At stake — along with industrial
supply chains supporting millions of American jobs — was the
president’s core campaign promise to rebalance the U.S. trading
relationship with China in favor of American blue-collar workers. Nearly
$660 billion in goods were traded between the two countries last year.
U.S. officials said Trump’s “America First” stance rocked Chinese leaders and halted the erosion of American manufacturing and technology industries byChinese trade practices.
the tariff war, which has lasted more than a year, also has claimed
numerous casualties. The Dow Jones industrial average is below its level
on Jan. 22, 2018, when Trump began the dispute by imposing levies on
imported washing machines. The benchmark index fell nearly 450 points
Thursday before closing down 139 points, or 0.5 percent.
As China retaliated for subsequent tariff salvos, American farmers and major U.S. industries were caught in the crossfire.
is the second-largest export market for U.S.-built vehicles. But
Chinese customers, who bought roughly 260,000 vehicles from the United
States in 2017, bought more than 100,000 fewer last year, according to
John Bozzella, president of Global Automakers, an industry group.
was the difference? The difference was the [Chinese] tariffs went from
15 to 40 percent,” Bozzella said. “So that’s what’s at stake.”
The politics of 2020 arealso
an inescapable subplot to the trade drama. In recent days, Trump,
writing on Twitter, linked Chinese backsliding on a tentative agreement
to Beijing’s desire to wait to make an easier deal with a Democratic
president “and thereby continue to ripoff the United States.”
leaders have publicly supported the president’s hard line. Those
statements illustrate the evident bipartisan consensus favoring a
tougher stance toward Beijing — but also the political risks for the
president of making a deal that a 2020 rival might criticize as soft.
Trump has successfully identified Chinese economic behavior that has
seriously harmed our economy over time. If U.S.-China talks eventually
produce a weak deal, his chances of reelection drop no matter who the
Democratic candidate is,” said Derek Scissors, a China expert at the
American Enterprise Institute. “If the president does what he insists he
will — get a great deal or walk — it will not only boost his reelection
prospects, it will boost our economy for years to come.”
said Thursday that he had received “a beautiful letter” from Chinese
President Xi Jinping and may speak to him by phone, though he did not say whether that would occur before the scheduled increase in tariffs takes effect.
Trump said Xi’s message was: “Let’s work together. Let’s see if we can get something done.”
Lighthizer began meeting shortly after 5 p.m. Thursday with Liu to continue negotiations aimed at a comprehensive deal.
Those talks had been proceeding smoothly, with U.S. officials predicting a final accord could be agreed to as soon as this week.
But China last weekend angered the president by trying to water down
its commitments, according to Lighthizer. Chinese officials balked at
specifying in the agreement which laws would be amended to address U.S.
concerns over forced technology transfer and intellectual property
protection, U.S. officials said.
getting very close to a deal, and then they started to renegotiate the
deal. We can’t have that,” the president said, following a White House
event on preventing surprise medical bills. “It was their idea to come
Liu, speaking upon his arrival in D.C.,
acknowledged the recent difficulties. “Much to our regret, we had some
problems during our negotiation,” he told Xinhua and CCTV. But, he said,
“China believes that raising tariffs is not a solution to the
Trump said that he expected “a very
strong day” at the negotiating table but added that “our alternative is
an excellent one,” an apparent reference to the tariff increase.
China had vowed to retaliate “in kind” if the president proceeds with the increase to 25 percent from 10 percent on $200 billion in Chinese products.
Along with Friday’s increase, the president has also threatened to extend tariffs to all $540 billion in annual Chinese imports.
president had delayed the tariff increase on two earlier occasions in
an effort to give negotiators time to strike a bargain that would
include massive purchases of American products and structural changes in China’s state-led economy.
more than five months of accelerated diplomacy, following a Trump-Xi
dinner in December at the Group of 20 summit in Buenos Aires, several
core issues remain to be resolved.
Chinese negotiators insist that all the tariffs the United States imposed last year be eliminated in any deal.
the president wants to keep some or all of the import taxes in place as
leverage to encourage Chinese compliance. The administration is wary of
repeating what it sees as the mistakes of earlier Republican and
Democratic administrations: reaching agreements with China that lacked
ironclad enforcement mechanisms.
are being paid by U.S. importers and, ultimately, by consumers. Yet the
president frequently boasts about the revenue the federal government
receives from higher tariffs.
most economists say such a broadening of the trade conflict would
inflict serious damage on both economies, the president insists his
tariffs helped the U.S. economy grow at a 3.2 percent annual rate in the
“I’m different than a lot of people. . . . I happen to think that tariffs for our country are very valuable,” Trump said.
business leaders, who support the president’s efforts to combat Chinese
trade practices, are growing weary of the costs of his preferred tool.
Tariffs will cost Polaris Industries Inc. — a Medina, Minn., maker of
snowmobiles and motorcycles — roughly $200 million annually if the
increase to 25 percent takes effect, said Scott Wine, the company’s
“We barely make $400 million profit,” Wine said. “It’s a significant issue.”
company has 9,000 employees in the U.S. But its main competitor
assembles its vehicles in Mexico, escaping the U.S. tariffs on Chinese
goods that hit Polaris’s imported wire harnesses and machined parts, he
“We’re losing market share right now,”
said Wine, who added he would be forced to consider shifting production
to Mexico if the tariffs become permanent.
retaliation could take the trans-Pacific relationship into potentially
dangerous territory, according to Chris Krueger, an analyst with Cowen’s
Washington Research Group.
During the past
year of tit-for-tat tariff exchanges, China has imposed tariffs on all
but $10 billion of its purchases from the United States.
keep pace with Trump’s planned escalation, Beijing may use other
weapons, including state-backed boycotts of American products, tighter
customs inspections and intensified tax audits of U.S. companies,
The economic and political fallout from such steps “are a lot harder to predict and prone to accident,” he added.
Robert Costa in Washington and Anna Fifield in Beijing contributed to this report.