President Trump imposed 25 percent tariffs on 800 Chinese products worth $34 billion Friday, and China took little time hitting back. "After the United States imposed unfair tariffs on Chinese goods, our tariffs on part of the U.S. products also took effect immediately," Chinese Foreign Ministry spokesman Hu Chunhua said Friday. China's Commerce Ministry accused Trump of launching "the biggest trade war in economic history" and said "China is forced to strike back to safeguard core national interests and the interests of its people." Beijing's retaliatory tariffs will affect 500 U.S. products, including soybeans, seafood, electric cars, and meat.
Economists say if the U.S. and China stop at $34 billion in tariffs, or even $50 billion, "the overall impact on both economies will be minimal even though some industries will suffer," CNNMoney says. But Trump threatened tariffs on up to $550 billion in Chinese goods Thursday — an amount "bigger than the $505 billion of goods that the United States imported from China last year," CNNMoney notes — and if he made good on his threat, the trade war would cause some serious damage to the U.S. and global economies.
China's state-run China Daily said in an editorial Friday that "the Trump administration is behaving like a gang of hoodlums with its shakedown of other countries, particularly China," and "its unruliness looks set to have a profoundly damaging impact on the global economic landscape in the coming decades, unless countries stand together to oppose it." Peter Weber
On Monday evening, after the Dow Jones Industrial Average closed down more than 300 points as the market digested the fallout from President Trump's growing trade wars, Trump tweeted that he was "surprised that Harley-Davidson, of all companies, would be the first to wave the white flag" by moving production of its iconic motorcycles offshore to avoid paying the European Union's retaliatory tariffs. The EU, Harley's No. 2 market, slapped tariffs on motorcycles, orange juice, bourbon, and other politically sensitive goods after Trump levied steep tariffs on imported aluminum and steel.
“Harley owners are not happy with it, I assure you, but what do you do to compete?” The Harley-Davidson community reacts to the iconic brand moving some jobs overseas to offset tariffs pic.twitter.com/MyWGGbvjbc
— TODAY (@TODAYshow) June 26, 2018
"If Trump's trade policies are leading an iconic company like Harley-Davidson to move production out of the United States, then who exactly is benefiting?" asked Edward Alden, a senior fellow at the Council on Foreign Relations. "This will pose a real challenge to the president's core claim that his policies will lead companies to build more things in the U.S."
But Harley isn't the first U.S. company reacting negatively to Trump's tariffs — on June 15, the last major U.S. nail manufacturer, Missouri's Mid-Continent Nail Corp., cut 60 contract jobs, warning that 200 more layoffs could come by the end of July, and without an import tariff exemption, the entire company could be out of business by Labor Day. There will be winners as well as losers if the trade war escalates, The Washington Post notes — the Tax Foundation predicts that 48,585 American jobs will be lost under the tariffs Trump has already enacted, and more than 250,000 jobs could vanish if he follows through on his China threats. But his steel tariffs have encouraged U.S. steel and aluminum plants to restart production, salvaging hundreds of well-paying jobs. Peter Weber
European Union counterpunches with $3.3 billion in new U.S. tariffs, and China dials up the rhetoric
The European Union retaliated against President Trump's steel and aluminum tariffs Friday with tariffs on about $3.3 billion worth of American goods, including bourbon, orange juice, peanut butter, and motorcycles. The tariffs, mostly 25 percent, are designed in part to "make noise" by targeting politically important states like Kentucky, Florida, and Wisconsin, EU trade commissioner Cecilia Malmstrom said. The EU implemented the tariffs a week earlier than expected, "a signal that the EU is striking back and taking this seriously," said economist Holger Schmieding at Berenberg Bank in London.
The EU is just one region counterpunching against the Trump administration's tariffs. Turkey is targeting U.S. products and India has announced tariffs on 29 U.S. products, including steel and iron, almonds, walnuts, and chickpeas. Trump is also looking at new tariffs on auto imports, opening a new front in the trade war. The big trade conflagration, however, is with China. The U.S. will start imposing new levies on $34 billion in Chinese goods on July 6, with $16 billion to come later and then up to $400 billion more; China vows immediate tariffs on soybeans and other agricultural products. By the first week in July, $75 billion in U.S. products will be hit by new foreign tariffs, according to the U.S. Chamber of Commerce's John Murphy.
"We've never seen anything like this," at least not since the 1930s, said Mary Lovely, an economist at Syracuse University. Trump is wagering that his tariffs will inflict more pain than they cause, forcing trade partners to capitulate. China, which has started fashioning itself as the global defender of free trade, is starting to escalate its rhetoric, too. "We oppose the act of extreme pressure and blackmail by swinging the big stick of trade protectionism," China's Commerce Ministry said Thursday. An editorial Friday in the state-run China Daily newspaper called the protectionist "trade crusade of Trump and his trade hawks" a self-defeating "symptom of paranoid delusions." Peter Weber
President Trump will announce tariffs on about $50 billion worth of Chinese imports as soon as Friday, administration official told several news organizations, and China said it is reluctantly prepared to retaliate; Beijing has already drawn up its own list of $50 billion in targeted U.S. goods, including beef, soybeans, and orange juice. Trump threatened to levy the tariffs in March, and his administration is finalizing a list of $100 billion more in Chinese goods, Reuters reports. Administration officials say the tariffs are in response to China forcing U.S. companies to share technology secrets with Chinese business partners, but Trump mostly focuses on America's trade deficit with China.
On Thursday, Secretary of State Mike Pompeo was in China to brief leaders on Trump's North Korea summit. Standing by his side, Chinese State Councilor Wang Yi told reporters that Trump has two choices, "cooperation and mutual benefit" or "confrontation and mutual loss. China chooses the first," he added. "We hope the U.S. side can also make the same wise choice. Of course, we have also made preparations to respond to the second kind of choice." Beijing has also said recent U.S.-China trade agreements won't go into effect if Trump follows through with the new tariffs.
Scott Kennedy, a specialist on the Chinese economy at the Center for Strategic and International Studies, says China isn't bluffing. "I don't think they would cower or immediately run to the negotiating table to throw themselves at the mercy of Donald Trump," Kennedy told The Associated Press. "They see the U.S. is isolated and the president as easily distracted." Tariffs will almost certainly raise prices for consumers, though White House officials say their list is designed to minimize that impact. Peter Weber
Trump cited national security to slap tariffs on close U.S. allies. His tweets don't even pretend to play along.
President Trump spent a not insignificant part of the weekend complaining on Twitter about America's trade relationships with its closest allies, including Germany, NATO, and especially Canada. In fact, he and his economic advisers lobbed several personal, false attacks at Canadian Prime Minister Justin Trudeau, with Trump focusing on Canada's steep tariff on certain dairy imports. "Fair Trade is now to be called Fool Trade if it is not Reciprocal," Trump tweeted. "Our Tariffs are in response to his of 270 percent on dairy!"
But Trump was actually able to unilaterally impose 25 percent tariffs on imported steel and 10 percent tariffs on aluminum "because — and only because — of a Kennedy-era special exemption to normal trade law for national-security purposes," David Frum notes at The Atlantic. Congress wouldn't have approved those tariffs, though Senate Majority Leader Mitch McConnell (R-Ky.) won't allow Congress to try to block them. Frum continued:
Trump has signed documents attesting that he imposed tariffs — to protect vital defense interests of the United States. Now he has changed his story. The tariffs on steel and aluminum from Germany, the U.K., Mexico, and all the others were not a national-security measure, but a retaliation for Canada's restrictions on dairy imports. Whatever you think of Canada's milk protectionism (and few Canadians who don't directly profit from it will defend it), it is not a threat to U.S. national security. [The Atlantic]
The tariffs are a good example of an emboldened Trump having "ignored the warnings of some advisers" and "instead sought out people who will find ways to get done what he wants accomplished," The New York Times reports. "When the president could not quickly enlist the support of Robert E. Lighthizer, the United States trade representative, to find a way to make national security an issue with regard to imported automobiles, he circumvented his trade expert and asked Wilbur Ross, the commerce secretary, to carry out an investigation." Ross delivered. Peter Weber
President Trump's 25 percent tariff on imported steel and 10 percent levy on aluminum went into force for Mexico, Canada, and the European Union at midnight on Friday, and all three key U.S. allies quickly vowed to retaliate. The specter of a trade war sent U.S. markets reeling, with the Dow closing down 252 points, or 1 percent, on Thursday. The EU has promised to target imports of U.S. products like Kentucky bourbon, motorcycles, and blue jeans, while Mexico said it will slap tariffs on U.S. pork, grapes, cheeses, apples, and flat steel. Canada, which provides most of America's imported steel and aluminum, said it will hit the U.S. with tariffs on $12.8 billion worth of steel, toilet paper, and other goods.
Early Friday, Germany's economy minister said the EU might coordinate its response with Canada and Mexico. French President Emmanuel Macron called Trump's tariffs "illegal" and warned that as the world learned in the 1930s, "economic nationalism leads to war." Canadian Prime Minister Justin Trudeau said "these tariffs are totally unacceptable" and criticized Trump's national security justification for imposing them. "That Canada could be considered a national security threat to the United States is inconceivable," he said.
"There will be a lot of focus in the weeks ahead on the direct, first-round effects of the steel and aluminum tariffs" in the U.S., including higher prices for certain products and some businesses that "shutter entirely," writes Neil Irwin at The New York Times. But the "longer-term danger for the American economy" is that Trump's "trade policy is displaying an erratic, improvised, us-against-the-world quality." In a market economy, "businesses can thrive despite bad policies," as long as they are stable, he adds. "That stability is part of what differentiates rich countries from poor ones," and the big cost of Trump's policies is "the risk that the United States is not as stable and reliable a place to do business as you once thought." Peter Weber
Barring an unlikely last-minute deal, President Trump will follow through with his threat to impose tariffs on steel and aluminum from the European Union by Friday, The Wall Street Journal and The Associated Press report. The imposition of 25 percent tariffs on imported steel and a 10 percent levy on aluminum will likely be met by swift retaliatory EU tariffs on motorcycles, bourbon, peanut butter, orange juice, and other exports from America, as well as further damage already raw U.S.-European relations. In late April, Trump delayed the tariffs on the EU, Canada, and Mexico until June 1 to allow space for trade negotiations, but his envoys are frustrated that the EU isn't offering concessions.
Trump cites national security as the rationale for his tariffs, and EU officials have said they will respond with levies against up to $3.3 billion in U.S. exports using a World Trade Organization (WTO) mechanism for inappropriate protectionism. And if the EU responds, Axios says, "that move would effectively give a green light for other WTO members to retaliate. Nobody wants to be considered a bad actor — but if the EU does it, they're considered a good global actor, so others are more likely to follow." Such a trade war would drive up costs for consumers. Trump isn't expected to impose the tariffs on Canada and Mexico Friday. Peter Weber
President Trump will meet with U.S. officials Saturday following their return from trade negotiations in China. The president tweeted about the debriefing Friday evening, suggesting he is not satisfied with the results of the conference:
Our high level delegation is on the way back from China where they had long meetings with Chinese leaders and business representatives. We will be meeting tomorrow to determine the results, but it is hard for China in that they have become very spoiled with U.S. trade wins!
— Donald J. Trump (@realDonaldTrump) May 5, 2018
Led by Treasury Secretary Steven Mnuchin, the delegation arrived in China Thursday and reportedly made demands including a $200 billion reduction in China's trade surplus to the U.S. by 2020. Washington also demanded China stop its "Made in China 2025" subsidies for Chinese industry, and asked that there be no retaliatory trade taxes or restrictions for the Trump administration plan to impose new tariffs on Chinese exports.
Beijing, meanwhile, requested an end to an American investigation into Chinese trade and production policies as well as U.S. restrictions on certain technological exports to China.
"The U.S. is too demanding," an unnamed Chinese trade policy adviser told the South China Morning Post. "The difference is too much. The problems cannot be solved by China over a short-run nor could they be solved merely by China without coordination from the U.S." Both governments characterized the talks as blunt. Bonnie Kristian