Trump Renews Trade War as China Talks End Without a Deal
WASHINGTON — Trade talks between China and the United States ended on Friday without a deal as President Trump raised tariffs on $200 billion worth of Chinese imports and signaled he was prepared for a prolonged economic fight.
Mr. Trump, who just weeks ago was predicting a signing ceremony for an “epic” trade deal with Chinese leader Xi Jinping, reclaimed his familiar stance of threatening China and insisting his aggressive approach would help the American economy. In a flurry of tweets on Friday, Mr. Trump warned that he would tax nearly all of China’s imports if Beijing continued to backtrack on a trade deal.
“Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch!” Mr. Trump said on Friday morning, adding that the Chinese “should not renegotiate deals with the U.S. at the last minute.”
The toughened stance has thrust the world’s two largest economies back into a trade war that just one week ago had seemed on the cusp of ending. Talks between the United States and China broke down over the weekend, after Mr. Trump and his advisers were taken aback by what they saw as China’s attempt to renege on parts of an emerging trade deal. Mr. Trump is now moving ahead with plans to impose 25 percent tariffs on an additional $325 billion of Chinese products — meaning nearly all Chinese imports to the United States would be heavily taxed.
On Friday afternoon, Mr. Trump suggested that the ball was in Beijing’s court, saying “the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!”
While discussions resumed in Washington on Thursday and Friday, they lasted only a few hours and no further negotiations are scheduled. Mr. Trump called the discussions “candid and constructive” and China’s vice premier, Liu He, said the talks went “fairly well.”
Stock markets fell in early morning trading, with the S&P 500 down more than 1 percent but regained some ground after Mr. Mnuchin’s comments.
It remains unclear whether the two countries can salvage a trade agreement that is complicated by political dynamics on both sides of the Pacific. Mr. Trump, who has promised to be tough on China, is eager to avoid being seen as signing a weak deal that does not take advantage of the leverage the United States has created with its tariffs. But Mr. Xi is also facing pressure from hard-liners within China, who do not want to acquiesce to the United States, particularly America’s demands that China make changes to its laws.
On Friday, it appeared that the trade dispute was lurching in the direction of an all-out economic war. In addition to raising tariffs to 25 percent on $200 billion worth of Chinese goods, Mr. Trump said his administration is preparing to tax another $325 billion worth of China’s imports. China has threatened to retaliate with its own “countermeasures,” which include ending purchases of American farm goods and erecting other nontariff barriers for companies trying to gain access to the Chinese market.
Tim Keeler, a former chief of staff at the United States trade representative said it would normally take four to six weeks of hearings and a public comment period to put additional tariffs in place, though Mr. Trump could try to expedite that process. “It puts them in a much stronger legal position, domestically, if they go through the notice and comment process,” Mr. Keeler said.
Steven Mnuchin, Treasury secretary, and Robert Lighthizer, Mr. Trump’s top trade negotiator, greeted the Chinese delegation on the steps of the office of the United States Trade Representative on Friday morning. But talks ended shortly after and the Chinese delegation is expected to return to Beijing on Friday evening.
The president said Friday that talks with China continued “in a very congenial manner” but that “there is absolutely no need to rush.”
Chinese officials said the decision to come to the United States after Mr. Trump’s tariff threat was intended to show they are serious about continuing discussions. But it is unclear whether China is willing to make the changes that the Trump administration is demanding, including codifying much of the emerging agreement into Chinese law. Mr. Trump’s advisers want to ensure China does not violate an agreement that is aimed at giving American companies greater access to China’s market and ensuring protections for their technology and trade secrets.
“I come here facing pressure,” Mr. Liu said on Thursday in an interview with China Central Television in Washington. “That expresses China’s greatest sincerity. And we want to resolve some of the differences we face honestly, confidently and rationally. I think there is hope.”
Mr. Trump continued to insist that his tough approach to China would benefit the United States economy, particularly farmers, who have faced retaliation from China as a result of the trade war. The United States has been pressing China to buy more American agriculture products, including soybeans, as part of the emerging trade deal.
After the United States raised tariffs on Chinese goods, Beijing fired back by imposing its own tariffs on American agricultural products and slowing purchases of American crops.
While the administration set up a $12 billion aid program to help farmers hurt by the trade war, many farmers said it did not do enough to stem their losses and economists have criticized the subsidies as less efficient than opening foreign markets to trade.
Mr. Trump appears to be sensitive to the fact that farmers, many of whom support his presidency, could bear the brunt of additional retaliation from China.
“Make no mistake about it, we have already had preliminary discussions in the White House for additional support for farmers if this impasse with China continues,” Mike Pence, the vice president, said in remarks on Thursday in Minnesota.
Sonny Perdue, the agriculture secretary, said on Friday that he spoke to Mr. Trump and that the president directed him to develop a new plan to support farmers. Mr. Perdue said on Twitter that Mr. Trump “loves his farmers and will not let them down!”
Economists have almost uniformly rejected the president’s arguments that tariffs are good for the United States, saying that these taxes reduce economic activity by raising prices for consumers.
The United States and China had been nearing a trade deal that would lift tariffs, open the Chinese market to American companies and strengthen China’s intellectual property protections. But discussions fell apart last weekend, when China called for substantial changes to the negotiating text that both countries had been using as a blueprint for a sweeping trade pact. American officials said that China claimed that provisions of the deal would be in violation of Chinese laws — which could not be easily changed — and that the United States was demanding too much and giving too little.
Myron Brilliant, head of international affairs for the U.S. Chamber of Commerce, said the business community was “ deeply concerned about recent suggestions that China is backing away from progress made to date.”
“Prolonging trade tensions and the escalation of tariffs are in neither country’s interest,” he said.
But businesses large and small were also concerned about the toll that higher tariffs would take on their sales and profits. The tariffs, which went into effect at 12:01 a.m. on Friday, will apply only to goods that leave China after that time, effectively giving several weeks’ extension for products that are already on ships on the water. But without a quick resolution, businesses will face higher costs for a range of products they import from China.
“We are disappointed that the U.S. and China were unable to reach a deal in time to avoid another escalation of tariffs,” said Naomi Wilson, senior director of Asia policy for ITI, a lobbying group for the technology sector. “This specific tariff increase will affect every day telecommunications equipment like modems and routers that help Americans connect to the internet and with each other.”
Still. some economists said that the higher rate should not inflict too much pain on the broader United States economy in the near term.
“Even if the dispute escalates, with Trump following through on his threat to extend the 25 percent tariff to all of China’s imports, the impacts on U.S. real G.D.P. and inflation would still be modest,” Andrew Hunter, senior U.S. economist at Capital Economics, wrote in a note to clients.
Current and former Trump administration officials noted that negotiations between the United States and China have stalled before and then been revived by Mr. Trump, who has developed a relationship with Mr. Xi.
Michael Pillsbury, a China scholar at the Hudson Institute who advises the Trump administration on trade, said that the apparent collapse of the talks was a sign that hard-liners are winning the debate in China and pressuring Mr. Xi not to acquiesce to Mr. Trump.
“There is information coming out of Beijing that this is part of a larger move by the hard-liners to persuade Mr. Xi to change a number of policies and to get tougher,” he said.
While Mr. Trump appears to be gambling with the United States economy, confronting China is one issue where Democrats and many Republicans have been encouraging him to remain assertive in hopes that China will make significant changes to its economic policies.
The Republican National Committee defended Mr. Trump on Friday against criticism that he has been unable to close the deal with China.
“While others have acknowledged China’s trade cheating for years and done nothing, President Trump is determined to not let China off the hook until it ends its destabilizing practices,” the R.N.C. said in a statement.
In recent days, Mr. Trump has mocked Democrats and potential 2020 opponents, suggesting that China hopes to wait out his presidency and face a weaker negotiator.
Democrats have largely been quiet about Mr. Trump’s approach to China, but some have said that his confrontational approach has squandered an opportunity to bring about the changes that he seeks.
“The question is how do you use U.S. leadership,” said Jack Lew, who served as Treasury secretary under President Barack Obama. “Do you use it to try to force a major counterpart to capitulate and do it in a humiliating way? Or do you use your moral leadership, which has driven the process forward in the past.”