A 25 percent tariff on a total of $525 billion of goods imported from China?
That’s exactly what U.S. President Donald Trump threatened on Sunday as he exerted some pressure ahead of upcoming trade talks and escalated political tensions with China. The threats, per two tweets on Sunday by Pres. Trump–a hike to 25 percent from 10 percent on $200 billion in goods from China by Friday, and 25 percent on another $325 billion in goods currently untaxed–created havoc in the financial markets as investors tried to sort through what the implications will be should those tariffs actually be applied.
On Monday, the U.S. equity markets fell in early morning trading after the opening of the day’s trading sessions. The Dow Jones Industrial Average fell by as much as 471 points, but regained some of its earlier losses by noontime, falling instead by 247.20 points. The Nasdaq Composite Index, which tracks many of the technology stocks of companies that would be impacted by any change in tariffs, fell by as much as 182.15 points in early trading, but regained some ground and instead declined by 87.08 points around noontime trading. Oil prices for Brent crude also slumped 2.1 percent initially in early trading in Asia, bounced back later in midday trading in London, only to slide again on fears that China was thinking about cancelling the next round of trade talks.
Representatives for the two countries are still slated to meet this week to continue the next round of talks. Negotiators from China, led by Vice Premier Liu He, are expected to arrive in Washington on Wednesday. There’s been talk in Washington before Sunday’s tweet that the two countries are close to a resolution. Trump said on Friday in the Oval Office that the deal itself was “going along pretty well.” A central issue in the negotiations concerned the protection of U.S. intellectual property interests.
According to Trump’s two tweets on Sunday, China has been paying tariffs to the U.S. of “25 percent on $50 billion dollars of high tech,” and 10 percent on $200 billion of other imported goods. He said the tariffs will go up to 25 percent for the $200 billion in imported goods on Friday. What he also threatened, but for which he didn’t provide a timeframe, was the $325 billion of additional goods from China that “remain untaxed, but will be shortly, at a rate of 25 percent.”
Trump also said, “These payments are partially responsible for our great economic results.” He also gave his reason for upping the ante on tariffs: “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”
Trump further noted that the tariffs paid to the U.S. “have had little impact on product cost, mostly borne by China.”
Two retail industry trade organizations on Sunday were quick to denounce the planned tariff increase, noting that American families are the ones who eventually end up paying for the increases.
Hun Quach, vice president of international trade at the Retail Industry Leaders Association, said, “Tariffs are taxes American families pay–$24 billion and counting. Raising tariffs means raising taxes on millions of American families and inviting further retaliation on American farmers, which jeopardizes domestic jobs. We want President Trump to successfully reach a deal with China that puts a check on anti-competitive behavior. But a deal that increases tariffs on everyday goods will be a loser for middle class families.”
Likewise, David French, National Retail Federation’s senior vice president for government relations, said in response to Trump’s threat: “Tariffs are taxes paid by American businesses and consumers, not by China. A sudden tariff increase with less than a week’s notice would severely disrupt U.S. businesses, especially small companies that have limited resources to mitigate the impact.”