Trade war escalates as Trump hikes tariffs on Chinese goods

US President Donald Trump called China's earlier tariff hike on US goods "politically motivated".
US President Donald Trump called China's earlier tariff hike on US goods "politically motivated".PHOTO: AFP

US President also orders American firms to exit China, while Beijing slams 'bullying acts'

US President Donald Trump has escalated the trade war with China as he declared higher retaliatory tariffs on virtually all Chinese imports while demanding that American companies exit China.

His move on Friday dimmed hopes that the protracted conflict would end soon, as he arrived in France for the G-7 summit of world leaders.

China yesterday slammed his move as a maximum pressure tactic, warning that it would seriously undermine the international trading order.

"Such unilateral and bullying acts of trade protectionism and extreme pressure run counter to the consensus of the heads of state of China and the United States, and run counter to the principles of mutual respect, equality and mutual benefit," a spokesman for the Ministry of Commerce said.

"China strongly urges the United States not to misjudge the situation, or underestimate the determination of the Chinese people. It must immediately stop its erroneous practices, or bear all the consequences," the spokesman added.

A 30 per cent tariff on US$250 billion (S$347 billion) of goods from China, currently subject to a 25 per cent tariff, will take effect on Oct 1, Mr Trump announced on Twitter after the day's trading closed. A scheduled 10 per cent tariff on US$300 billion of Chinese goods on Sept 1 and Dec 15 will also be raised to 15 per cent, he added.

The tariff hike capped off a tumultuous day that began with Beijing announcing two tranches of counter-tariffs on US$75 billion of American imports, to take effect on Sept 1 and Dec 15.

Mr Trump signalled on Twitter that he would not back down, roiling US markets.


The Dow Jones Industrial Average shed more than 600 points to close 2.4 per cent lower, while the S&P 500 fell 2.6 per cent and the Nasdaq dropped 3 per cent.

Mr Trump cited the International Emergency Economic Powers Act of 1977, which would give him broad authority to regulate international commerce, as his legal basis for ordering American companies out of China.

But Georgetown Law professor and Council on Foreign Relations senior fellow Jennifer Hillman said on Twitter that invoking that law would require Mr Trump to first declare a national emergency, which Congress could terminate, and that it would affect only future and not existing investments in China.

Business groups also said that bowing out of China altogether made no sense, given the massive size of China's market.

"President Trump may be frustrated with China, but the answer isn't for US companies to ignore a market with 1.4 billion consumers," said US Chamber of Commerce executive vice-president Myron Brilliant on Twitter.

The next round of US-China trade talks are scheduled to take place in Washington next month, but chances that they will yield a breakthrough appear low.

Eurasia Group analysts Michael Hirson, Paul Triolo and Todd Mariano said in a note that a meeting between Mr Trump and Mr Xi, possibly during the Asia-Pacific Economic Cooperation summit in Chile in November, will likely also be the last window for a meaningful compromise before the US election season heats up.

"And if Trump appears vulnerable, Beijing will make a more definitive decision not to reward him with a trade deal, even if the President seeks one out," they said.


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A version of this article appeared in the print edition of The Sunday Times on August 25, 2019, with the headline 'Trade war escalates as Trump hikes tariffs on Chinese goods'. Print Edition | Subscribe