Trump escalates trade war with China with plan to raise tariffs

Donald Trump has intensified the trade war with China by announcing plans to raise the tariff imposed on the $ 200 billion Chinese products from 10% to 25% on Friday.

The US president also threatened to impose tariffs on all Chinese trade with the United States, a move that could further destabilize relations between the two economic powers.

The move led to sharp declines in shares in Asia Pacific on Monday, with China’s blue chip index falling 4%, its biggest decline in two months, while Hang Seng fell 2.5%.

Fears that Trump’s comments could sink trade talks were aggravated when the editor of China’s Global Times newspaper said Monday that Chinese Vice Premier Liu He was “very unlikely” to go to the United States this week. .

“Let Trump raise rates, let’s see when commercial talks can resume,” Hu Xijin said in a tweet.

Trump announced the movement on Twitter and complained that negotiations between the two countries were taking place too slowly.

The measure will affect more than 5,000 products manufactured by Chinese farms and factories, from fresh and frozen foods to chemicals, textiles, metallurgy, construction materials, electronic products and consumer goods.

Trump originally imposed a 10% tariff on these products last September in an attempt to cut the US trade deficit with China and force concessions on issues such as intellectual property rights. It had been scheduled to jump to 25% in January, but the president held back while talks between the two parties continued.

Currently, almost half of China’s sales to the United States are affected by tariffs and Trump now points to the remaining $ 325 billion.

He warned: “325 billion dollars of additional products that China sends us remain tax-free, but soon they will be, at a rate of 25%. The tariffs paid to the USA UU They have had little impact on the cost of the product, mainly by China. The trade agreement with China continues, but very slowly, as they try to renegotiate. Do not!”

Such a move could cause more pain and disruption to the Chinese economy, and probably trigger a reprisal from Beijing.

Patrick Chovanec, chief strategist at Silvercrest Asset Management, warned that Trump’s stock could disappoint investors and cause markets to fall.

“The prospect of higher and broader tariffs was a factor that caused markets to fall in the fourth quarter of 2018, but since then markets have come to believe that some kind of agreement to avoid them was imminent,” Chovanec said.

But Reva Goujon, vice president of global analysis at Stratfor, suggested that Trump’s move could be a trick to help make negotiations on the line.

Economists have blamed the trade war between the United States and China for a slowdown in global growth in recent months.

US Treasury Secretary Steven Mnuchin and business representative Robert Lighthizer held talks with Chinese Vice Premier Liu He in Beijing last week. Liu was expected to return to Washington in a few days.

Despite Trump’s claim that China pays these tariffs, they are actually paid by American companies when they import goods. Those companies can choose to pass the cost to their customers through high prices, absorb the cost and reduce their profits, or try to negotiate the cost of the products downwards.

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