US Raises Tariffs on Chinese Goods

Jeannie Matthews
May 11, 2019

U.S. President Donald Trump said Friday there was "no need to rush" to get a trade deal with China, hours after he raised tariffs on US$200 billion in Chinese goods, escalating a battle over China's technology ambitions.

Danske Bank analysts note that the U.S. has raised tariff rates on USD200bn of Chinese goods from 10% to 25% and China says it deeply regrets the move and will retaliate.

Despite weeks of glowing statements about "progress" in trade talks with China, Trump on Sunday (May 5) rattled stock markets when he announced on Twitter that tariffs on US$200 billion worth of Chinese-made products would rise from 10 percent to 25 percent.

The Commerce Ministry said negotiations were continuing, and that it "hopes the United States can meet China halfway, make joint efforts, and resolve the issue through cooperation and consultation".

Beijing retaliated for previous tariff hikes by raising duties on US$110 billion of American imports.

The talks resumed Friday, Treasury Secretary Steve Mnuchin describing them has having been "constructive".

Trump defended the tariff hike earlier on Friday and said he was in "absolutely no rush" to finalize a deal, adding that the US economy would gain more from the levies than any agreement.

He said manufacturers should make their products in the USA, so they'll face "NO TARIFFS!"

The talks came to a conclusion Friday with no deal.

China's top trade negotiator Liu He landed in Washington last night for two days of talks, and Trump said that he still hopes a compromise is possible.

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US officials are insisting that any deal be strictly enforced so that China lives up to its promises-something they say Beijing has repeatedly failed to do in the past.

Trump tweeted that if the US bought $15 billion in agriculture from farmers it would be far more than China buys now.

"The escalation of trade friction is not in the interest of the people of the two countries and the people of the world", a Chinese Commerce Ministry spokesman said, as quoted by Xinhua and The Wall Street Journal. "'How about let's go back to Thursday?'" Trump said referring to the conversation his administration is having with the Chinese.

The three major US indexes had been near all-time highs May 3, with the Dow up 12 percent for the year, the S&P 500 up more than 15 percent and the Nasdaq ahead 20 percent.

Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington, said the talks were at a delicate stage and much depended on what sort of proposal Liu is bringing to Washington.

Michael Taylor, a managing director for Moody's Investors Service, said the tariff hike "further raises tensions" between the two countries.

At the White House, Trump said he received "a lovely letter" from Chinese leader Xi Jinping and would "probably speak to him by phone". Investors worry about the impact of a full-blown trade war because it would raise costs for companies importing Chinese goods, could make doing business in China more hard and would generally threaten to slow the global economy. Nix said he'd expected exports would become 20 percent of the company's business in 2018, but tariffs imposed by Trump ended Cleveland Whiskey's foreign sales. Tariffs may go up but China will aim to use measures that hurt the U.S. but not themselves. The Shanghai Composite Index rose 3.1% and Hong Kong's Hang Seng Index closed up 0.8%.

European and Asian markets seemed more optimistic.

He said the earlier 10 percent increase was absorbed by companies and offset by a weakening of the Chinese currency's exchange rate.

The deficit is the difference between what America sells to the rest of the world and what it imports.

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