President DonaldTrump’s Sunday threat to ramp up U.S. tariffs on Chinese goods sent markets roiling on Monday and prompted retail groups to condemn the trade war escalation.
The move would raise tariffs on $200 billion in Chinese imports to 25%, up from 10%, currently, and set a 25% tariff on $325 billion of currently untaxed goods, including many consumer products. The president’s warnings — which he conveyed in a series of tweets — were seen by some as a negotiating tactic in the ongoing trade talks with Beijing. A Chinese delegation is set to meet with the White House beginning Wednesday, and as recently as Friday, the Trump administration said the negotiations were progressing.
Chinese markets fell by 6% following the tweets, and U.S. stocks tumbled in premarket trading. The Dow Jones Industrial Average fell by 450 points at market open, with the S&P 500 down 1.55% and the Nasdaq down 2.2%. The selloff follows several months of gains prompted by strong economic indicators and the Federal Reserve’s position to back off interest rate increases.
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Retail, footwear and apparel groups — which have widely condemned the trade war for its impact on American consumers and manufacturers — warned that increased tariffs could reverse the positive economic trends the country has enjoyed so far in 2019.
“We strongly oppose the president’s announcement that he will continue to penalize American families and add additional obstacles to economic growth by imposing further tariffs on U.S. imports from China,” said Rick Helfenbein, president and CEO of the American Apparel & Footwear Association. “As has been made clear by the administration’s use of tariffs during the past year, tariffs are an additional tax burden placed on Americans. These taxes are not paid by foreign nations, and they result in higher costs that are simply passed on to the American consumer.
“A sudden tariff increase with less than a week’s notice would severely disrupt U.S. businesses, especially small companies that have limited resources to mitigate the impact,” David French, senior vice president for government relations at the National Retail Federation. “If the administration follows through on this threat, American consumers will face higher prices, and U.S. jobs will be lost.”
After several months of better-than-expected jobs growth, a report from the Trade Partnership, an economic research firm, found that a tariff hike to 25%, along with tariffs on all remaining Chinese imports and retaliation, would result in the loss of 2.2 million U.S. jobs. It would also cost the average family of four $2,389 and reduce GDP by over 1%.
“We want to see meaningful changes in China’s trade practices, but it makes no sense to punish Americans as a negotiating tactic,” said French. “If the administration wants to put more pressure on China, it should form a multinational coalition with our allies who share our concerns. We urge the administration to reconsider this tax hike on Americans and stay at the bargaining table until a deal is reached.”
Trump doubled down on his position Monday morning, tweeting, “The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!”
The U.S. trade deficit in goods with China rose to $419.2 billion in 2018, up from $375.5 billion in 2017, according to a Commerce Department report. The deficit fell 3.4% to $49.4 billion in February, the lowest level since June 2018.