By Alex Wayne
President Donald Trump abruptly escalated his trade war with China, announcing that he would impose a 10% tariff on $300 billion in Chinese imports that aren’t yet subject to U.S. duties.
The new tariff will be imposed beginning Sept. 1, Trump said in a tweet Thursday that broke a tentative trade cease-fire between the world’s two biggest economies. The 25% tariff already imposed on $250 billion in Chinese goods will remain in place, he said.
A draft list of $300 billion worth of targets published by the Trump administration in May included a raft of consumer and technology goods, including most of Apple Inc.’s major products such the IPhone, along with toys, footwear and clothing. The final list hasn’t yet 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.”
...during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%...
— Donald J. Trump (@realDonaldTrump) August 1, 2019
Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer returned from talks with Chinese counterparts in Shanghai this week without reporting much progress. The sides both said they’d meet again in early September in Washington for the next round of talks.
Negotiations have been at an impasse since May after the U.S. said the Chinese reneged on provisions of a tentative deal.
State-run Chinese media called the Shanghai talks “pragmatic.” The two sides confirmed they had discussed increasing Chinese imports of U.S. agricultural products, which have fallen dramatically this year, and that they would meet again in September in Washington.
U.S. stocks pared gains on the news, while yields on 10-year Treasuries fell to the lowest since 2016.
Trump and Chinese President Xi Jinping agreed to a ceasefire in their year-long trade war at the Group of 20 summit in Osaka, Japan in June in what the U.S. said was an effort to get the talks back on track. But Trump said Thursday that China failed to fulfill a handshake agreement with Xi to buy more U.S. agricultural products.
Trump also said that Xi hasn’t met a promise to crack down on U.S. shipments of fentanyl, a dangerous opioid that has killed tens of thousands of Americans in recent years. “Many Americans continue to die,” Trump said in a tweet.
Just before Trump’s announcement, United Nations Secretary-General Antonio Guterres warned of “growing friction” between the world’s two largest economies.
Guterres said he feared the widening gulf between the U.S. and China risked creating two competing global blocs, each with their own “dominant currency, trade and financial rules, their own internet and artificial intelligence strategy, and their own contradictory geopolitical and military views.”