President Donald Trump on Sunday threatened to dramatically ramp up the trade war with China unless a breakthrough on trade talks is reached by the end of the week.
The president said current tariffs on $200 billion worth of Chinese goods will be increased from 10% to 25% and the US will place 25% tariffs on an additional $325 billion worth of Chinese goods that are currently untaxed on Friday. Trump said the slow pace of trade deal negotiations was the cause for the new restrictions.
“For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods,” Trump tweeted. “These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!”
Trade talks between the US and China have been ongoing since Trump and Chinese president Xi Jinping reached a temporary trade truce at the end of November, but major sticking points on how to enforce the deal and what to do with current tariffs have caused problems in the discussions.
Chinese Vice Premier Liu He, the country’s top economic official, is scheduled to travel to Washington, DC, for another round of talks this week. While a deal is close, reports suggest that the US has backed down on a handful of demands designed to force China to make fundamental changes to its economy.
As it stands the US has placed tariffs on $250 billion worth of goods coming from China, while Beijing has responded with tariffs on $110 billion of American goods.
The trade war kicked off in March 2018 when the Trump administration released a report detailing the economic damage caused by the theft of US intellectual property by Chinese companies. This led to two rounds of back-and-forth tariff raising.
While US negotiators have been focused on forcing China to crack down on IP theft and open its market to American companies, Trump has also placed a large amount of attention on decreasing the US-China trade deficit — despite economists’ consensus that the bilateral trade balance means little about the comparative health of the US economy.
Economists have warned that a dramatic escalation of the trade war could cause US consumers to pay more for goods coming from the country and potentially cause serious negative consequences for the American economy.
Additionally, contrary to what the president insisted in his tweet on Sunday, multiple studies have shown that overwhelming majority of the tariffs’ costs have been borne by American consumers and businesses.