On Sunday, U.S. President Donald Trump accused China of moving too slowly on trade talks, and he threatened to raise existing tariff on $200 billion worth of Chinese exports by an additional 15 percentage points by the end of the week.
“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 . . . The 10% will go up to 25% on Friday,” the president wrote. “325 Billions Dollars [sic] of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%.”
Trump said that the move was a response to a Chinese attempt to renegotiate terms in ongoing trade talks. On Monday, U.S. trade representative Robert Lighthizer confirmed that the talks have not been proceeding in the direction that American officials desire. He indicated that Chinese negotiators had sought to materially alter the terms of a written agreement as the talks neared completion. “Over the course of the last week or so we have seen an erosion in commitments by China. That in our view is unacceptable,” Lighthizer said. “Come Friday there will be [more] tariffs in place.”
Markets reacted swiftly to Trump’s announcement: the Dow fell nearly two percentage points in early trading Monday, the Shanghai Composite was down by more than five percent and Hong Kong’s Hang Seng index shed about three percent. However, the Dow recovered on news that talks are scheduled to continue and that a previously-planned visit by a Chinese delegation to Washington will go forward. Financial analysts are watching the delegation closely, as hundreds of billions of dollars in international trade could be affected if the negotiators can’t reach a deal by Friday.