Donald Trump warned that he was prepared to impose tariffs on imports from China worth as much as $500bn as the US fired its biggest shot so far in the accelerating trade war between the world’s two largest economies.
Coming only hours before US customs officials were due to begin collecting 25 per cent tariffs on 818 different products worth $34bn in annual imports from China, the US president’s comments highlighted the escalating economic consequences of the trade fight between Washington and Beijing.
The US president reiterated plans for a further $16bn in trade to be targeted in the coming weeks and for far larger actions beyond that. He also repeated a warning that the US had plans “in abeyance” for a further $200bn in Chinese imports should China retaliate against the new US tariffs — something Beijing is expected to do within hours of the new tariffs taking effect on Friday.
“And then after the $200bn we have $300bn in abeyance, OK?” he said on a visit to the US state of Montana. “It’s only on China.”
The president’s comments on Thursday came after the US Federal Reserve released minutes of its previous policy meeting showing that businesses were already putting capital investment plans on hold as a result of the uncertainty caused by Mr Trump’s trade policies.
The latest threats from the president also amounted to a blunt outline of his plans for an escalating trade war against China that business groups and farmers have warned would have further negative consequences for the US economy.
“It is now indubitable that [President] Trump’s threats of tariffs need to be taken both literally and seriously by US trading partners,” said Eswar Prasad, a Cornell University economist and China expert. “The two largest economies in the world are careening towards an open and ugly trade war that might prove difficult to contain or find an exit path from.”
Both Washington and Beijing said they had no plans to back down, with China’s President Xi Jinping last month warning that Beijing would “hit back” at US tariffs.
“This time they will certainly strike back,” said Tu Xinquan, a trade expert at the University of International Business and Economics in Beijing. “There will be no retreat.”
China’s customs agency said this week that Chinese retaliatory tariffs would take effect immediately after American tariffs on Chinese goods kicked in at 12.01am on Friday US Eastern time — just after midday on Friday in China.
Friday’s batch of US tariffs are set to target products ranging from electric vehicles to industrial lathes and other components and machinery used by US manufacturers. In retaliation, China has promised to target US farm and energy exports such as politically sensitive soyabeans and crude oil.
US business and agricultural groups have warned that they will bear the brunt of any trade war with China as well as those that Mr Trump has launched with neighbours in North America and allies such as Japan and the EU by hitting them with steel tariffs and provoking retaliation.
“The evidence of pain from a now multi-front trade war is multiplying every day,” said Brian Kuehl, executive director of Farmers for Free Trade, a lobby group. “From China cancelling soyabean orders, to cheese exports to Mexico plummeting, to farm equipment prices rising, the stories of financial loss are now rolling in from farms across America.”
US companies operating in China are bracing for other responses as well, including increased administrative audits or shipping delays at ports or in transit: all measures that China used against South Korean companies during a 2016 spat.
Many US companies are also expecting Chinese measures to shift business to their competitors in Europe or Asia, in a pointed reminder that, as Mr Xi said last month. “when one door closes, another opens”.
The combination of new tariffs on American cars with China’s rollback of normal import duties will for instance make cars imported from the US significantly more expensive than their German or Japanese rivals.