By David Lawder and Humeyra Pamuk
WASHINGTON (Reuters) – U.S. President Donald Trump on Friday ordered his trade chief to begin the process of imposing tariffs on all remaining imports from China, underscoring a lack of progress by U.S. and Chinese negotiators in talks aimed at ending an escalating trade war.
Trump’s move would subject about $300 billion worth of Chinese imports to punitive tariffs, U.S. Trade Representative Robert Lighthizer said in a statement.
Lighthizer said a final decision has not been made on the new duties, which would come on top of an early Friday tariff rate increase to 25% from 10% on $200 billion worth of Chinese imports.
Despite the escalation in tariffs, Trump and Chinese Vice Premier Liu He said they would press on with more talks, avoiding the worst-case scenario of a complete breakdown of negotiations between the world’s two largest economies.
“Over the course of the past two days, the United States and China have held candid and constructive conversations on the status of the trade relationship between both countries,” Trump said on Twitter.
“In the meantime, the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!” Trump said.
Liu later told Chinese state media that China and the United States had agreed to hold more talks in Beijing. He said differences remained over “principal issues” but that the talks were constructive and had not broken down.
China dealt the talks a major setback last week by proposing extensive revisions to a draft trade agreement. China wanted to delete prior commitments that Chinese laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers.
The issue dominated the talks between Liu, Lighthizer and U.S. Treasury Secretary Steven Mnuchin on Thursday and Friday, and two people familiar with the discussions said no progress was made as Liu sought to defend the changes.
The top economic adviser to Chinese President Xi Jinping argued that China could accomplish the policy changes through decrees issued by its State Council, or cabinet, the sources said. But Lighthizer rejected this, telling Liu that the United States was insisting on restoration of the previous text.
Major U.S. stock indexes, which had fallen sharply through the week as investors worried that the 10-month-old trade war could spiral out of control, reversed course to close higher after Mnuchin also called the talks “constructive.” Yields on U.S. government debt also drifted higher after the end of the talks.
In earlier tweets, Trump defended the tariff hike and said he was in “absolutely no rush” to finalize a deal, adding that the U.S. economy would gain more from the levies than any agreement.
Despite his insistence that China will absorb the cost of the tariffs, it is U.S. businesses that will pay them and likely pass them on to consumers. It may take three or four months for American shoppers to feel the pinch, economists and industry consultants say.
Following the U.S. tariff hike, China’s Commerce Ministry said it would take countermeasures but did not elaborate. China responded to Trump’s tariffs last year with levies on a range of U.S. goods including soybeans and pork.
U.S. Agriculture Secretary Sonny Perdue said on Friday that Trump had asked him to create a plan to support American farmers. The U.S. government already has rolled out up to $12 billion to help offset their China-related losses.
The new 25% U.S. duty is being imposed on more than 5,700 categories of products, applied to products leaving China after 12:01 a.m. EDT (0401 GMT) on Friday. The biggest sector affected is a $20 billion-plus category of internet modems, routers and similar devices. Circuit boards, furniture, and lighting products also are high on the list.
Seaborne cargoes shipped from China before midnight were not subject to the new tax as long as they arrive in the United States prior to June 1. Those cargoes will be charged the original 10% rate.
The higher tariffs could reduce U.S. gross domestic product by 0.3% and China’s by 0.8% in 2020, consultancy Oxford Economics said.
Although Trump has maintained that his trade policies will boost U.S. manufacturing, some in the sector are concerned that the policies could backfire if the dispute with China is not resolved soon.
“We were mildly excited yesterday when we thought this was the end game,” said Michael Haberman, president of Gradall Industries Inc in New Philadelphia, Ohio, which sells about 5% of its machinery to China. “For us, the longer this continues the more dangerous it becomes.”
(Graphic: U.S.-China tariff war and the S&P 500 – https://tmsnrt.rs/2WA1LWX)
(Reporting by Jeff Mason and Humeyra Pamuk; Additional reporting by Susan Heavey, David Lawder, Eric Beech and Alexandra Alper in Washington, Tim Aeppel in New York, Yawen Chen, Michael Martina, Ryan Woo, Ben Blanchard and Kevin Yao in Beijing, and Xihao Jiang in Shanghai; Writing by Paul Simao and David Lawder; Editing by Rosalba O’Brien and Leslie Adler)