In an unexpected move on Thursday, U.S. President Donald Trump announced that the U.S. would impose 10% tariffs on an additional $300 billion of Chinese goods starting on September 1st. The tariffs are in addition to the 25% tariffs that the U.S. has already imposed on $250 billion of Chinese imports and tariffs will now cover virtually all Chinese imports into the U.S.
The move was a surprise to business people, economists and members of both the Chinese and U.S. government who had been participating in trade talks in Shanghai this week and many in China considered it a stab in the back at a time when talks were just resuming, had seemed to be making progress and more talks were being scheduled for September.
On Friday, China vowed that it would retaliate against the new U.S. tariffs and in response to these new tariffs, as well as uncertainty about U.S. monetary policy, the Dow Jones Industrial Average dropped more than 300 points, while the S&P lost 1.3% and the NASDAQ lost 1.9%.
Hua Chunying, a spokesperson for China’s Foreign Ministry said at a press briefing in Beijing that that the Chinese government would have to take countermeasures if the U.S. was committed to putting more tariffs on Chinese goods.
According to members of the Trump administration, during the last meeting between Trump and Chinese Premier Xi Jinping in late June on the sidelines of the G-20 summit in Japan, China agreed to buy “large” amounts of U.S. agriculture products once an agreement was reached. However, Trump believed that China would buy these products immediately in July and when large amounts of products were not bought, he said that the Chinese had lied to him.
From the Chinese perspective, increased buying of U.S. agriculture products at the level that Trump wants will only be undertaken once a new trade agreement has been produced and signed by both countries.
In an editorial in the Global Times on Friday was headlined ... “Tariffs won’t help US sell 1kg more soybeans.” The editorial noted that:
“The US looks quite temperamental. It accused China of backtracking on a trade deal as Beijing insisted on some of its own demands. This time, the US faulted China for not stepping up to buy more US farm products. It threatened new tariffs once again, obviously hoping to deter China.
“China regrets this new, unreliable behavior. Purchasing US agricultural products in bulk is a complicated commercial activity. Chinese officials have said several times that the purchases are in progress. But they are not as simple as buying a bag of peanuts in the supermarket.
“The Chinese market needs US agricultural products, but it won't make purchases for the sake of reaching a trade agreement with the US without prior consideration of how to sell and consume them. The purchase of several million tons of US soybeans to satisfy Chinese demand is not large, but if purchased under US tariff pressure, even one kilogram is unnecessary. Reaching a trade deal is important, but ensuring that the negotiating process is equal and reasonable is also of great importance to China. China believes mutual respect and equality is essential to safeguarding national interests.“
It’s not only the Chinese government that is protesting the new tariffs and Trump’s ramping up of the trade war, but also a variety of U.S. and China related business groups.
• Craig Allen, President of the US-China Business Council said in a statement: "We're concerned that today's action will drive the Chinese from the negotiating table, reducing hope raised by a second round of talks that ended this week in Shanghai. We're concerned these additional tariffs will further erode our reputation as a reliable supplier, and our farmers, workers, and consumers will suffer more,"
• David French, Senior Vice President of the National Retail Federation, said, "the tariffs imposed over the past year haven't worked, and there's no evidence another tax increase on American businesses and consumers will yield new results. We are disappointed the administration is doubling-down on a flawed tariff strategy that is already slowing US economic growth, creating uncertainty and discouraging investment."
• Rick Helfenbein, President and CEO of the Apparel and Footwear Association said, "the fact that this tweet comes after only one meeting with the Chinese delegation following the resumption of talks is extremely concerning." He also called on Congress to "step up and take back its authority" to regulate US trade policies.
• Jason Oxman, President & CEO of the Information Technology Industry Council said, "this unprecedented tariff hike would exacerbate that harm and serve to move the US and China further from a meaningful resolution."
• Gary Shapiro, President and CEO of the Consumer Technology Association said, “The Trump administration is again taxing the American people in the form of new tariffs on their favorite technology products."
• Myron Brilliant, Executive Vice President of the US Chamber of Commerce said that the new tariffs "will only inflict greater pain" on American businesses, farmers, workers and consumers, and undermine the US economy.”