US President Donald Trump escalates trade war with tariff hikes on all Chinese goods

Trump (above) called China's earlier tariff hike on US goods "politically motivated".
Trump (above) called China's earlier tariff hike on US goods "politically motivated".PHOTO: AFP

WASHINGTON - President Donald Trump declared on Friday (Aug 23) he would further raise American tariffs on all Chinese imports hours after China announced tariffs on American goods, the second escalation within the day of a trade war between the world’s two biggest economies that has shown no sign of ending soon.

On Oct 1, a 30 per cent tariff will take effect on US$250 billion (S$340 billion) of goods from China currently being taxed at 25 per cent, said Mr Trump. 

A separate 10 per cent tariff on US$250 billion of Chinese goods scheduled to go into effect on Sept 1 will now be raised to 15 per cent, he added.

“China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!),” said Mr Trump in an evening tirade on Twitter after the stock market closed.

He added that China had been taking advantage of the US on trade and stealing its intellectual property, and that the “very unfair trading relationship” had to be balanced.

It was his second rant of the day - in the morning, he responded to Beijing’s imposition of fresh tariffs on US$75 billion of American goods by declaring that he would stem the “loss” of billions of American dollars to China and stop Chinese theft of American intellectual property. 

“We don’t need China and, frankly, would be far better off without them,” said the President on Twitter.

He added that he “hereby ordered” American companies to immediately start looking for an alternative to China and bringing manufacturing operations back to the US. 

His statements were greeted with incredulity from trade economists, who noted that he had no authority or power to give such an order, and exasperation from business leaders who said that bowing out of China altogether made no business sense.

“President Trump may be frustrated with China, but the answer isn’t for US companies to ignore a market with 1.4 billion consumers. Escalating tensions is not good for market stability, investor confidence or American jobs,” said US Chamber of Commerce executive vice-president Myron Brilliant on Twitter.

 
 
 
 

Though retailers have been diversifying their supply chains for years, finding alternative sources is a costly and lengthy process that can take years, said the National Retail Federation (NRF) in a statement.

"It is unrealistic for American retailers to move out of the world's second largest economy, as 95 per cent of the world's consumers live outside our borders," the NRF added. 

Stocks plunged in the wake of Mr Trump’s morning tweets. The Dow Jones industrial average shed more than 600 points to close at 2.4 per cent lower, while the S&P 500 fell 2.6 per cent and the Nasdaq index dropped 3 per cent.

In a statement, the Office of the US Trade Representative said that China’s tariffs targeting US products were “unjustified” and that Mr Trump’s move was in response to China’s decision. 

Mr Trump will depart on Friday night for the Group of 7 summit in Biarritz, France, during which the global economy and its sluggish growth are expected to feature heavily in discussions. 

The next round of US-China trade talks are scheduled to take place in Washington next month, but chances that they will yield any breakthrough now appear low. China’s tariffs are set to take effect in two tranches, on Sept 1 and Dec 15.

Said the NRF: “Where does this end? The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers.”