Trump Says He’s Poised to
Escalate China Trade War Within Hours
By: Joshua Gallu and Shawn Donnan
August 23, 2019 7:21 PM IRDT Updated on August 24, 2019 12:57 AM IRDT
President Donald Trump
signaled he may escalate the trade war with China in the coming hours after the
country’s latest round of tariffs, firing off a new demand that U.S. companies
seek alternatives to producing goods in China.
“I will be responding to
China’s Tariffs this afternoon. This is a GREAT opportunity for the United
States,” Trump tweeted Friday, after China threatened to impose additional
tariffs on $75 billion in American goods, including soybeans, cars and oil.
A meeting on trade took
place around midday in the Oval Office, according to people familiar with the
discussions. Trump is scheduled to leave late Friday for the G-7 summit in
France, where trade tensions and their impact on the global economy are at the
top of the agenda.
Trump added in a flurry
of tweets that he “hereby ordered” American companies to start looking for
alternatives to making products in China. It wasn’t immediately clear what
legal authority the president would have to force such corporate decisions.
The president laced into
China, saying “We don’t need China” and that the U.S. would be “better off
without them.” He also took aim at the Federal Reserve over what he’s called
its failure to lower interest rates to boost the economy and keep the dollar
from becoming too strong, which weighs on exports.
U.S. stocks fell after
Trump’s remarks, with the S&P 500 Index dropping 2.6% on the day.
Technology stocks were hardest-hit. Treasuries rallied.
....better off without
them. The vast amounts of money made and stolen by China from the United
States, year after year, for decades, will and must STOP. Our great American
companies are hereby ordered to immediately start looking for an alternative to
China, including bringing..
The angry set of tweets
from Trump came after China announced its retaliation for new U.S. tariffs due
to take effect Sept. 1 and Federal Reserve Chairman Jerome Powell repeated his
concern that U.S. trade policy was contributing to a slowdown in both U.S. and
global economies. They also reflected Trump’s growing frustration with the lack
of progress in his trade battles with China, according to analysts close to the
“The president has been increasingly
frustrated in the last three months’’ with China after the May breakdown of
talks that he believed were about to yield a deal, said Michael Pillsbury, a
China expert with the Hudson Institute in Washington with whom Trump has consulted
in the past.
Trump’s most likely
response, Pillsbury said, would be to raise tariffs from 10% to 25% on
remaining imports from China that are due to start taking effect Sept 1. But he
had other ways to increase pressure, Pillsbury added, including giving the
final green light to sales of F-16s to Taiwan that have been signed off on by
the State Department. The administration has notified Congress it intends to go
ahead with the sale.
Derek Scissors, a China
expert at the American Enterprise Institute who has also advised the
administration, agreed that an increase in tariffs was the most likely course
of action, though it could be staged to give China more time to respond.
Trump’s order to U.S.
companies to abandon China would mean very little in the short-term, Scissors
said. But the president does have other ways he could increase pressure on U.S.
companies to stop doing business with China, particularly if he chose to invoke
a national security emergency and ban tech companies from selling certain
products to Chinese buyers.
“It’s worth the market being a little nervous
that U.S. tech companies are involved with China and that they are providing
China with dual-use technologies,’’ Scissors said. “That’s what the hawks are
angry about. So the president can take action against those companies not by ‘I
hereby order,’ but by starting a process where the direct pressure on them goes
China’s newest tariffs
came earlier Friday in retaliation for Trump’s latest planned levies on Chinese
imports, which have pushed U.S. stocks and commodities lower. The move takes
aim at the heart of Trump’s political support -- factories and farms across the
Midwest and South at a time when the U.S. economy is showing signs of slowing.
Trump reiterated his
criticism of the Fed after Powell’s remarks were released earlier Friday morning:
“My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?”
Trump said in one of his tweets, referring to Chinese President Xi Jinping.
The news from Beijing
rekindled concerns about the world’s two largest economies and a global growth
outlook that’s already looking shaky.
Some of the Chinese
countermeasures will take effect starting Sept. 1, while the rest will come
into effect from Dec. 15, according to the announcement from China’s Finance
Ministry. This mirrors the timetable the U.S. has laid out for 10% tariffs on
almost $300 billion of Chinese shipments.
China will put an extra
5% tariff on American soybeans and crude-oil imports starting next month. The
resumption of a suspended extra 25% duty on U.S. cars will resume Dec. 15, with
an additional 10% on top for some vehicles. With existing general duties on
autos taken into account, the total tariff charged on U.S.-made cars would be
as high as 50%.
The U.S. Chamber of
Commerce called China’s move “unfortunate but not unexpected.”
“The fact of the matter
is that nobody wins a trade war, and the continued tit-for-tat escalation
between the U.S. and China is putting significant strain on the U.S. economy,
raising costs, undermining investment, and roiling markets,” Myron Brilliant,
the chamber’s head of international affairs, said in a statement.
After Trump gave the
go-ahead earlier this month for tariffs on the almost $300 billion in Chinese
imports that haven’t been hit by higher duties, China halted purchases of
agricultural goods and allowed the yuan to weaken.
Other than possibly
raising the tariffs set to kick in Sept. 1, it isn’t clear what action Trump
might take. Inside the White House, hawks have been pushing for a direct
intervention in currency markets by the Treasury by pointing to a slowdown in
U.S. manufacturing, which many economists have blamed on tariffs imposed by
Trump and uncertainty surrounding his trade war with China.
Just how effective a Fed
cut or an intervention would be is unclear. The relevant Treasury fund has $92
billion in it. Even if the Fed were to join in, as it has in past
interventions, and match that amount, a $180 billion injection into a $5
trillion per day global foreign-exchange market might have a limited effect. It
might also unnerve markets and have longer-term economic consequences.
Beyond that, the
administration could raise further barriers to Chinese investment in the U.S.
or target China’s energy supply by revoking waivers that allow Beijing to
continue purchasing oil from Iran and Venezuela. Trump could also take steps to
further isolate Huawei
Technologies Co., which the U.S. deems a security threat, in its bid
to supply 5G technology in the U.S. Or, Trump could take a harder line against
Beijing over human rights and the autonomy of Hong Kong, where protests have
raged for weeks.
U.S. and Chinese
negotiators have spoken by phone and are planning another call in coming days.
People familiar with their intentions previously said that the Chinese
delegation is sticking to their plan to travel to the U.S. in September for
face-to-face meetings, which may offer a chance for further reprieve.
Trump also ordered mail
carriers to search for deliveries of the drug fentanyl coming from China.
“Also, I am ordering all carriers, including
Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE” deliveries
of the illegal drug. It isn’t clear what the carriers’ responsibilities are in
halting those shipments, which have helped fuel an opioid epidemic in the U.S.
Stopping shipments of
illegal fentanyl that enter the U.S. is a job that typically falls to
government agencies such as the Drug Enforcement Administration, Food and Drug
Administration and Customs and Border Protection.
Illegal Chinese fentanyl
is increasingly entering the U.S. through the Mexico border via drug
traffickers instead of being sent directly. It’s unclear if Trump also wants to
stop legal fentanyl, often used by cancer patients to treat pain, from entering
the U.S. as well, which would cause an outcry from patients.
— With assistance by
Saleha Mohsin, and Justin Sink