U.S. President Donald Trump vowed to impose a 10% tariff on $300 billion of Chinese imports from Sept. 1, sharply escalating a bruising trade war between the world’s largest economies and jolting financial markets.
The announcement on Thursday extends Trump’s trade tariffs to nearly all of the Chinese goods the United States imports and marks an abrupt end to a temporary truce in a trade row that has hurt world growth and disrupted global supply chains.
Trump also threatened to raise tariffs further if China’s President Xi Jinping fails to move more quickly to strike a trade deal.
“I think President Xi … wants to make a deal, but frankly, he’s not going fast enough,” Trump said.
Trump made the announcement in a series of Twitter posts after his top trade negotiators briefed him on a lack of progress in U.S.-China talks in Shanghai this week.
Trump later said if trade negotiations fail to progress he could raise tariffs further – even beyond the 25 percent levy he has already imposed on $250 billion of imports from China.
Senior Chinese diplomat Wang Yi told reporters on the sidelines of an Association of Southeast Nations event in Thailand the additional tariffs were “not a correct way” to deal with the bilateral dispute.
“Additional tariffs is definitely not a constructive way to resolve economic and trade frictions,” he said.
The news hit U.S. financial markets hard. On Friday, Asian stocks took a battering and the safe-haven yen jumped as investors rushed for cover.
Oil prices plummeted 7%, with Brent crude registering the biggest daily percentage drop since February 2016. The benchmark S&P 500, which had been in solidly positive territory on Thursday afternoon, closed down 0.9%. Benchmark U.S. Treasury yields also fell.
Retail associations predicted a spike in consumer prices. Target Corp tumbled 4.2%, Macy’s Inc fell 6% and Nordstrom Inc was down 6.2%.
Asked about the impact on financial markets, Trump told reporters: “I’m not concerned about that at all.”
Moody’s said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the euro zone.
The tariffs may also force the Federal Reserve to again cut interest rates to protect the U.S. economy from trade-policy risks, experts said.
Raising tariffs would lower the prospects of a deal rather than expedite it, China’s Global Times newspaper said. Beijing would focus more on efforts to survive a prolonged trade war, Hu Xijin, editor-in-chief of the Communist Party-backed newspaper, said on Twitter.
“New tariffs will by no means bring closer a deal that the U.S. wants; it will only make it further away,” Hu said.
Possible retaliatory measures by China could include tariffs, a ban on the export of rare earths and penalties against U.S. companies in China.
So far, Beijing has refrained from slapping tariffs on U.S. crude oil and big aircraft, after cumulatively imposing additional retaliatory tariffs of up to 25% on about $110 billion of U.S. goods since the trade war broke out last year.
China is also drafting a list of “unreliable entities” – foreign firms that have harmed Chinese interests. U.S. delivery giant FedEx is under investigation by China.
“China will deliver each retaliation methodically, and deliberately, one by one,” ING economist Iris Pang wrote in a note.
“We believe China’s strategy in this trade war escalation will be to slow down the pace of negotiation and tit-for-tat retaliation. This could lengthen the process of retaliation until the upcoming U.S. presidential election,” Pang said.