Economists have warned that the existing tariffs would hurt U.S. growth. But they are also worried an escalation to cover all trade from China and the Chinese retaliation it would provoke would do far more damage and could even tip the U.S. economy into recession.
China announced Monday its plans to raise duties on some $60 billion in American imports starting June 1, defying a call from Trump to resist escalating the trade war.
Less than two hours after Trump tweeted a warning that “China should not retaliate -- will only get worse!” the Ministry of Finance in Beijing unveiled the measures on its website. The new rate of 25% will apply to 2,493 U.S. products, with other goods subject to duties ranging from 5% to 20%, it said.
Higher U.S. tariffs will drive up the Federal Reserve’s preferred measure of underlying inflation, and further escalation could raise consumer prices even more and dent U.S. growth, Goldman Sachs Group Inc. economists said in a research note.
China’s move to hike tariffs came in response to the U.S.’s decision last week to increase levies on $200 billion in Chinese imports to 25% from 10%. Trump on Monday accused China of backing out of a deal that was taking shape with U.S. officials, saying Beijing reneged on an agreement to enshrine a wide range of reforms in Chinese law.
“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” Trump wrote on Twitter. “You had a great deal, almost completed, & you backed out!”
China has been careful to calibrate its response. The Chinese list released Monday matched Trump’s latest move in that it simply hikes the duties on a list of thousands of items that had already been targeted in an earlier phase of the trade war.
Beijing’s retaliation on about $60 billion of U.S. goods includes extra tariffs of as much as 25% on goods ranging from small aircraft, computers, and textiles to chemicals, meat, wheat, wine and LNG. Some auto parts remain exempted from retaliatory charges. Imports of cars aren’t affected, as an extra duty of 25% from a separate list was suspended during the negotiations as a sign of goodwill.
This article provided by Bloomberg News.