President Trump said Sunday that he will increase tariffs on Chinese imports on Friday, unexpectedly setting what appears to be a new deadline to produce a comprehensive deal or trigger an escalation of the year-long U.S.-China trade war.
Days before Chinese negotiators are scheduled to arrive in Washington, the president threatened to increase tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent on Friday and levy a new 25 percent fee on all remaining Chinese imports “shortly.’’
In a pair of tweets, Trump accused China of trying to “renegotiate” the terms of an agreement that negotiators have been trying to finish for five months.
The hard-line turn was at odds with recent administration optimism, and it unsettled plans for this week’s potential final round of negotiations.
The president’s tough talk also caught investors by surprise, threatening to short-circuit a market rally that has lifted stocks by more than 20 percent since late December.
Trump acted out of frustration over Chinese resistance to some of his most far-reaching demands, according to several analysts following the negotiations.
While Chinese negotiators have agreed to increase purchases of American products, they are unwilling to make major concessions on key U.S. complaints, including over Beijing’s generous subsidies for favored firms, U.S. business leaders said last week.
“Trump is probably anticipating criticism that we are heading toward a political deal reached for political reasons rather than a trade deal addressing the fundamental economic tools that enable China to discriminate against foreign firms,” said Jeff Moon, who negotiated trade issues with China during the Obama administration.
Some U.S. officials fear Beijing is trying to back away from commitments made during earlier rounds. Trump — who prides himself on his dealmaking skills — also is trying to rattle the Chinese, said two people who were briefed on the talks but were not authorized to speak publicly.
Chinese Vice Premier Liu He is scheduled to arrive in Washington on Wednesday for what had been billed as potentially the concluding rounds of bargaining.
Trump’s abrupt intervention adds a volatile element to the talks.
“The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!” the president tweeted on Sunday.
The office of the U.S. trade representative, Robert E. Lighthizer, had no immediate response to a request for comment.
Over the last year, Trump has set a series of deadlines to try to wring Chinese concessions. The tariff increase on $200 billion in Chinese goods was originally slated for Jan. 1, but the president delayed it for 90 days to allow negotiations with Beijing.
Just before the new March 1 deadline, he again pulled back to permit continued bargaining.
Throughout the on-again, off-again talks, the Chinese have studiously avoided reacting to presidential tweets. Moon said he saw little chance that Chinese President Xi Jinping would cancel this week’s scheduled meetings.
“They probably have additional concessions that they are saving in their back pocket for the absolute final phase of the negotiations, so they may offer minor concessions here just to keep things on track. But I would be surprised if those concessions consist of anything more than vague language and unenforceable promises,” Moon said. “To reward a threat like this would be to invite more such threats as the negotiations progress.”
In his Sunday tweets, the president repeated his mistaken claim that “China has been paying Tariffs to the USA” for 10 months. In fact, American importers pay those import levies.
While Chinese exporters on some occasions may lower their prices and absorb part of the tariffs, several recent studies have concluded that almost the entire financial burden has fallen on the U.S. economy.
“These payments are partially responsible for our great economic results,” the president added. Mainstream economists dispute this.
The American Apparel and Footwear Association, an industry group, urged Trump to drop his threatened escalation. Rick Helfenbein, the group’s president, said additional tariffs “will only hurt U.S. families, U.S. workers, U.S. companies and the U.S. economy.”
National Economic Council Director Larry Kudlow said Sunday that by announcing the potential tariff increase, Trump was “issuing a warning” to China.
“I’m a free-trade guy. The president’s tariffs, however, have been extremely useful in negotiating. . . . If it doesn’t work out, then I think what the president is saying in today’s tweet is that we will continue these tariffs,” Kudlow said during an appearance on Fox News Channel.
He acknowledged there are costs to American farmers and consumers when tariffs are imposed, but he maintained that the administration has taken action to help on that front.
Kudlow also said “structural issues and enforcement issues remain” when it comes to China’s trade practices.
“China has got to end its unfair, nonreciprocal trading system. They’re breaking the laws,” he said.
The president has spoken for months of prospects for a deal that would reset relations between the world’s two largest economies. His repeated claims that he was close to securing changes to China’s state-led economic system contributed to a sustained stock market rally.
Financial markets now may sour on his renewed tariff threats.
“This has all the makings of a complete disaster that could lead the stock market to crater this week,” Chris Rupkey, chief financial economist for Mitsubishi UFJ Financial Group, wrote in a client note.
Likewise, Gary Shapiro, president of the Consumer Technology Association, said raising the tariffs to 25 percent on just five days’ notice would “roil our markets, damage U.S. businesses and do serious harm to Americans’ retirement funds and pensions.”
U.S. and Chinese negotiators have been meeting for months to reach an agreement that would resolve Trump’s complaints about Chinese trade practices and the chronic U.S. trade deficit with China.
The two sides have been closing in on a deal expected to include major new purchases of American goods and a Chinese commitment to abandon efforts to steal or coerce U.S. companies into surrendering technology trade secrets.
Until the president’s tweets, recent administration statements had been optimistic about prospects for a deal.
Treasury Secretary Steven Mnuchin said last week that recent talks in Beijing were “productive,” an assessment echoed in a White House statement.
Last month, Trump said the two sides were on the verge of an “epic” and “monumental” deal that would address all of his complaints about Chinese trade practices. In recent days, there have been indications that he was preparing to weaken key demands to pave the way for an agreement, including a reduction in massive Chinese subsidies for state firms.
“Unpredictability is a hallmark of this administration,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies. “No one can count on a deal with China until it’s fully negotiated and the ink is dry.”
By David J. Lynch