The United States and China exchanged
blows Friday as each side increased punitive tariffs on the other,
intensifying a trade war that is threatening to engulf the global
economy.
In a rapid back-and-forth, Beijing took action against $75 billion in
American goods in response to US tariffs announced August 1, and
President Donald Trump lashed out in return by increasing existing and
planned tariffs on a total of $550 billion in Chinese products.
Trump's blistering Twitter screeds called into doubt chances for a quick
resolution to the trade war between the world's economic superpowers,
which by the end of the year will cover nearly all imports and exports
exchanged between the two countries.
Accusing China of "taking advantage of the United States on Trade,
Intellectual Property Theft, and much more," Trump said, "we must
Balance this very.... ...unfair Trading Relationship."
Existing 25 percent tariffs on $250 billion in Chinese goods will increase to 30 percent starting October 1, Trump said.
And tariffs on $300 billion in products, due to take effect September 1 at 10 percent, will now be set at 15 percent, he said.
"China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!)."
While Beijing worked for three weeks on its multi-tiered tariff
response, Trump's promised retaliation -- which came in a signature
tweetstorm -- was announced in less than 10 hours.
The rapidly changing conflict worries US companies, many of whom rely on
China for inputs, for finished products they sell and for
manufacturing.
"It's impossible for businesses to plan for the future in this type of
environment," said David French of the National Retail Federation.
"The administration's approach clearly isn't working, and the answer
isn't more taxes on American businesses and consumers. Where does this
end?"
- Ordered to move -
The attack came with Trump expected to ruffle feathers in France at the
weekend meeting of leaders of the G7 nations. Tensions are mounting
between Trump and the Europeans, Canada and Japan over trade tariffs.
The friction has already slowed US growth and undercut the global
economy, and the threat of a deterioration sent stock markets falling
sharply.
The Dow lost more than 600 points to close with a loss of 2.4 percent.
The German DAX lost more than one percent but London's FTSE gained
ground.
"Our great American companies are hereby ordered to immediately start
looking for an alternative to China, including bringing... your
companies HOME and making your products in the USA."
"We don't need China and, frankly, would be far... better off without them," Trump said.
It was unclear under what authority Trump could demand that private companies alter their production.
But the influential US Chamber of Commerce urged the two sides to return to the negotiating table to find a solution.
"While we share the president's frustration, we believe that continued,
constructive engagement is the right way forward," Myron Brilliant, the
business group's head of international affairs, said in a statement.
- China responds -
China's punitive tariffs of five to 10 percent will apply to 5,078 US
items, and are timed to start in tandem with the new US duties set to
take effect in two steps September 1 and December 15, China's state
council tariff office said.
Beijing also announced it would reimpose a 25 percent tariff on US autos
and a five percent tariff on auto parts, also starting December 15.
China had lifted those tariffs earlier this year as a goodwill measure
while trade talks were underway.
Trump already imposed steep tariffs on $250 billion in Chinese goods,
with a further $300 billion in imports targeted in the coming rounds.
Beijing has hit back with duties on around $110 billion of US goods --
or nearly all of the $120 billion worth of American goods it imported
last year.
China's commerce ministry said it will hit American frozen lobster,
frozen chicken feet, peanut butter and 914 other goods with new 10
percent punitive tariffs starting September 1.
Soybeans, crude oil and other energy goods face 5 percent tariffs.
US-made mango juice, electric buses and chemical products face 10
percent duties come mid-December while smaller aircraft, hand pumps and
bearings will be hit with 5 percent taxes.
Federal Reserve Chair Jerome Powell warned in a speech Friday that trade
tensions were exacerbating the global slowdown and the central bank
does not have a "rulebook" for dealing with the fallout.
But he also vowed to "act as appropriate" to sustain the sustain the US economy.
An alarm bell went off in the US Treasury bond market last week when
10-year bond yields briefly fell below the yields offered on a two-year
bond -- seen as a sign of looming recession -- and it happened again
Friday.
US officials have said in recent days that trade talks with China would continue next month.
However China's commerce ministry spokesman Gao Feng said Thursday he
had no information on the next round of meetings, while noting the two
sides remain in contact.
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