BEIJING — U.S. President Donald Trump announced Friday he would hit China with a 5% retaliatory tariff hike on roughly $550 billion worth of goods, on the same day Beijing said it plans to tariff $75 billion of U.S. goods.
The US Trade Representative said tariffs on $250 billion worth of goods will rise from 25 to 30%, effective Oct. 1. In addition, instead of raising tariffs on roughly $300 billion by 10% starting Sept. 1, the tax rate will be 15%.
The escalation from Washington comes hours after Trump “ordered” U.S. companies to “start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”
The Chinese tariffs, which are themselves a tit-for-tat response to previous U.S. commerce measures, and Trump’s reaction have sent markets into a turmoil.
Each protectionist step by Beijing and Washington makes clearer the world’s two largest economies are becoming more deeply enmeshed in a trade war with no end in sight, amid continued cycles of escalation that show no sign of abating.
The latest stand-off comes as Trump prepares to leave Washington for the G7 summit in Biarritz, France, a meeting of the world’s top democratic economies.
“China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!),” Trump tweeted.
The U.S. Trade Representative said the Oct. 1 tariffs will follow a “notice and comments” period where stakeholders can presumably seek exemptions from some imports.
Earlier on Friday China said it plans to impose tariffs on an additional $75 billion worth of U.S. goods imported into the country.
China’s Customs Tariff Commission of the State Council said the tariffs will range between 5% and 10% and be implemented in two phases on Sept. 1 and Dec. 15.
In a separate announcement, China said it would impose tariffs of 25% and 5% on U.S. cars and parts on Dec. 15.
China had warned it would retaliate if the U.S. goes ahead and raises tariffs on $300 billion of Chinese imports.
Trump did just that earlier this month, ending a brief truce reached between the U.S. president and his Chinese counterpart Xi Jinping at the G20 summit in June.
The fresh tariffs on a new slew of $300 billion worth of goods is set to take effect on Sept. 1, though Washington last week postponed the enactment of some duties until December to help prevent adverse effects on consumers ahead of Christmas holiday shopping.
The moves are the latest in a year-long trade war that is slowing the world economy. Washington has already slapped 25% tariffs on $250 billion worth of Chinese goods, to which China has retaliated with duties on $110 billion worth of U.S. imports.
Trump accused China of intellectual property theft, market access restrictions and reneging on a promise to curb exports of fentanyl.
The president said as a result he was “ordering” delivery services such as Fed Ex, Amazon, UPS and the U.S. Post Office to search and refuse packages of fentanyl from China and anywhere else. The companies reacted saying they already comply with regulations.
The powerful synthetic opioid is responsible for tens of thousands of deaths annually in the U.S.
U.S. retailers also reacted to the Trump order to consider alternatives to China, saying upping and moving was never a simple process and companies did not want to lose business in the world’s second largest economy, with cash flows that benefit the U.S. itself.
The U.S. Congressional Budget Office predicted Wednesday that the trade war with China and other U.S. trade policies will shrink US economic output by 0.3 percentage points by 2020.
The CBO report contradicted Trump's claims that the tariffs imposed on Chinese goods and Chinese retaliatory tariffs are not harming the U.S. economy.
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