WASHINGTON (AP) – United States (US) President Donald Trump angrily escalated his trade fight with China on Friday, raising retaliatory tariffs and ordering American companies to consider alternatives to doing business there.
He also blamed Jerome Powell, the man he appointed as Chairman of the Federal Reserve, for the state of the domestic economy, wondering who was a “bigger enemy” of the US – Powell or Chinese President Xi Jinping.
Even by the turbulent standards of the Trump presidency, his actions, all done via Twitter, were notable, sending markets sharply lower and adding to a sense of uncertainty on the eve of his trip to France for a meeting of global economic powers.
Trump’s move came after Beijing announced on Friday morning that it had raised taxes on US products. He huddled with advisers, firing off tweets that attacked China and the Fed. And he mockingly attributed a Wall Street drop of 573 points to the withdrawal of a marginal candidate from the Democratic presidential race. The Dow Jones average eventually closed down 623 points.
The president attacked the Fed for not lowering rates at an informal gathering in Jackson Hole, Wyoming, where no such action was under consideration. Powell, speaking to central bankers, gave vague assurances that the Fed would act to sustain the nation’s economic expansion, but noted that the central bank had limited tools to deal with damage from the trade dispute.
Trump said he would be raising planned tariffs on USD300 billion in Chinese goods from 10 per cent to 15 per cent. The Office of the US Trade Representative also said existing tariffs on another USD250 billion in Chinese imports would go from 25 per cent to 30 per cent on October 1 after receiving feedback from the public.
Late on Friday night, Trump told reporters at the White House: “I have no choice. We’re not going to lose close to a trillion dollars a year to China.”
He insisted, “Tariffs are working out very well for us. People don’t understand that yet.”
The impact could be sweeping for consumers.
“With each percentage point added to the tariff hikes, it becomes more and more difficult for importers not to pass the costs on to the US consumer,” said former US trade negotiator now at the Asia Society Policy Institute Wendy Cutler. “And this is not to mention the uncertainty that these increases contribute to the overall business environment.”
Trump acted hours after Beijing said it would hike tariffs on USD75 billion in US imports, a move some economists fear could tip a fragile global economy into recession.
The President appeared caught off-guard by China’s tariff increase, and was angry when he gathered with his trade team in the Oval Office before departing for France, according to two people familiar with the meeting who spoke to The Associated Press on condition of anonymity because they were not authorised to disclose closed-door conversations.
Administration officials, inclu-ding US Trade Representative Robert Lighthizer and adviser Peter Navarro, discussed potential retaliatory options. Treasury Secretary Steve Mnuchin, returning from vacation, joined by phone.
Earlier on Friday, the president said he “hereby ordered” US companies to seek alternatives to doing business in China. The White House did not cite what authority the president could use to force private businesses to change their practices.
Trump’s latest escalation will impose a burden on many American households. Even before he announced an increase on Friday, JP Morgan had estimated that Trump’s tariffs would cost the average household roughly USD1,000 a year if he proceeded with his threats.
Businesses large and small joined in a chorus of opposition to the intensifying hostilities.
“It’s impossible for businesses to plan for the future in this type of environment,” said Senior Vice President of Government Relations at the National Retail Federation David French. “The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?”
If Trump goes ahead with all the tariffs he’s announced, they would cover just about everything China ships to the US.
China, for its part, slapped new tariffs of five per cent and 10 per cent on USD75 billion of US products in retaliation. Like Trump’s, the Chinese tariffs will be imposed in two batches – first on September 1 and then on December 15.
China will also go ahead with previously postponed import duties on US-made autos and auto parts, the Finance Ministry announced.
Trump tweets on Friday included one declaring, “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing … your companies home and making your products in the USA.”