Trump to hike China tariffs

WASHINGTON — President Donald Trump, angered by Beijing’s decision on Friday to retaliate against his next round of tariffs and furious at his Federal Reserve chair for not doing more to juice the economy, said he will increase taxes on all Chinese goods and demanded that American companies stop doing business with China.

Trump, in a tweet, said he will raise tariffs on $250 billion worth of Chinese goods to 30 percent from the current rate of 25 percent beginning Oct. 1. And he said the United States will tax the remaining $300 billion worth of imports at a 15 percent rate, rather than the 10 percent he had initially planned. Those levies go into effect on Sept. 1.

“China should not have put new Tariffs on 75 BILLION DOLLARS of United States product (politically motivated!). Starting on October 1st, the 250 BILLION DOLLARS of goods and products from China, currently being taxed at 25 percent, will be taxed at 30 percent,” Trump said in a tweet.

In an earlier series of angry Twitter posts, Trump also called for American companies to cut ties with Beijing and said the United States would be economically stronger without China. The president also called the Fed chair, Jerome Powell, an “enemy” of the United States and compared him to President Xi Jinping of China, his trade nemesis, after Powell declined to signal an imminent cut in interest rates.

“My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” the president tweeted.

Behind the tirade was the growing reality that the type of trade war Trump once called “easy to win” is proving to be more difficult and economically damaging than the president envisioned. Trump’s stiff tariffs on Chinese goods have been met with reciprocal levies, hurting American farmers and companies and contributing to a global slowdown.

On Friday, China said it would increase tariffs on $75 billion worth of American goods, including crude oil, automobiles and farm products like soybeans, pork and corn in response to Trump’s plan to tax another $300 billion worth of Chinese goods in September and December.

Trump’s response to China unnerved investors, who worry that the trade war between the world’s two largest economies will further drag down global growth. Stocks fell sharply on Friday, with the S&P 500 closing down more than 2.5 percent. The Dow Jones Industrial Average was down slightly more than 2 percent and the technology-heavy Nasdaq index fell 3 percent.

Powell said on Friday that the Fed could push through another interest rate cut if the economy weakened further but suggested that the central bank’s ability to limit economic damage from the president’s trade war was constrained.

Talks between the two nations have largely stalled, with China refusing to accede to the United States’ trade demands. As economic damage from the yearlong dispute mounts, Trump has taken a scattershot approach to spurring the economy: clamoring for the Fed to cut interest rates, teasing the idea of tax cuts and, on Friday, commanding American companies to do his bidding against China.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing our companies HOME and making your products in the USA,” he tweeted, adding “We don’t need China and, frankly, would be far better off without them.”

Trump also said he was directing the U.S. Postal Service and private American companies like FedEx, Amazon and UPS to search packages from China for the opioid fentanyl and refuse delivery.

It was not yet clear on Friday how Trump planned to carry out his demands, including ordering companies to begin seeking alternatives to producing in China. Trump has routinely urged American companies to stop doing business in China and has viewed his tariffs as a way to prod them to move production. While some companies have begun looking for other places to locate their supply chains, including Vietnam, many businesses —particularly smaller ones —say such amove is costly, time-consuming and could put them out of business.

Business groups reacted with deep concern and pushed back against the notion that American companies would sever ties with China at Trump’s request.

“U.S. companies have been ambassadors for positive changes to the Chinese economy that continue to benefit both our people,” said Myron Brilliant, the head of international affairs at the U.S. Chamber of Commerce. “While we share the president’s frustration, we believe that continued constructive engagement is the right way forward.”

On Friday afternoon, the president hastily assembled his top trade advisers at the White House — including Treasury Secretary Steven Mnuchin, who joined by telephone — to settle on a response. The president was not aware that China’s retaliation was coming and was angry about being blindsided, according to people familiar with the matter.

Trump’s tweets on Friday caught most of his advisers and staff by surprise, and prompted alarm. Some of Trump’s advisers privately expressed concern that the ferocity of Trump’s response could derail the negotiations permanently and could unsettle supporters during an election year.

Trump’s advisers believe he is being urged on by Peter Navarro, a trade adviser who has been the main proponent of continuing down an antagonistic path with China. Navarro tried to play down the escalation on Fox Business Network, saying Beijing’s response was to be expected and would only galvanize support in the United States for Trump’s tough approach to China.

“I just think that the way that China is reacting to this whole thing is simply reinforcing America’s perception of China as a bad actor,” said Navarro, who is considered the biggest China hawk in the administration. “When China tries to bully us, that only strengthens our resolve.”

The State Council Tariff Commission in Beijing said that the tariffs were a response to Trump’s threat to impose new tariffs by Sept. 1. Trump had initially said he would impose 10 percent tariffs on $300 billion in Chinese-made goods on that date, essentially targeting everything that the United States buys from China that has not already been hit by previous rounds of tariffs. He later delayed more than half of the latest round of tariffs until Dec. 15 to avoid hitting American pocketbooks during the holiday shopping season. A few tariffs were scrapped entirely.

On Friday afternoon, he said those tariffs would start at a rate of 15 percent, rather than 10 percent.

Both sides have a lot at stake. Recent market moves have signaled that many investors expect the American economy to slide into recession, with the trade war as a major reason.

The Chinese government has its own worries. The country’s economic growth is already slowing. Though Beijing keeps tight control over China’s economy and still has a lot of financial firepower at its disposal to help growth, a huge and growing debt problem has limited its options.