Trump Escalates Trade Dispute With China
On Sunday, May 5th, U.S. President Donald Trump reignited a simmering trade feud with China with a promise on twitter to raise tariffs until a favorable deal was reached. The surprise threat came at a time of importance for both nations, as a delegation of senior Chinese officials is due to visit Washington, D.C. later this week to finalize negotiations and put an end to the trade war.
In his tweet, Mr. Trump declared that in addition to raising tariffs on 200 billion dollars worth of previously tariffed goods, “325 billion dollars of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%.” In total, more than 625 billion dollars worth of Chinese exports to the United States are on the verge of facing increased tariffs.
Despite appearing to be unprovoked, the raises in tariffs against China most likely were in response to Chinese officials refusing to enact further legislation to protect the rights of American businesses and their intellectual property. The Trump Administration has made the safeguarding of American firms from Chinese technology poaching a priority and has made it clear that there will be no compromise on this issue.
The head trade representative for the United States, Robert Lighthizer, expressed his disappointment with the Chinese State, declaring, “Over the course of the last week or so we have seen an erosion in commitments by China. That in our view is unacceptable.”
At the current moment, the United States is in a more comfortable position economically than China, leading senior economic officials to support the tariff hikes. In recent months, the U.S. has been experiencing a period of unprecedented economic growth, while the Chinese economy has begun to slow. President Trump is taking a calculated risk in gambling that the strong U.S. economy can take any economic retaliation from China, and that China will be driven to the bargaining table in the face of a recession.
Both Chinese leadership and the international business community were caught off guard by the actions of the President. Markets across the world opened at lower levels on Monday, with both the Dow Jones and the NASDAQ down over 1.5%. However, the greatest fall was born by Chinese investors, who saw domestic markets tumble by almost 5%. The global decreases signaled a grand uncertainty by firms both abroad and within the United States about the latest strategy by Mr. Trump.
China also appeared to be at a loss for how to adequately respond to the President’s announcement. Early on Monday they seemed to be considering canceling a visit between Chinese Premier Li Keqiang and White House Officials, but later retracted and said the meeting would still take place.
Foreign Ministry Spokesperson, Geng Shuang, offered up China’s official response, saying, “Raising tariffs won't resolve any problem. We hope the US can work with China to meet each other halfway, accommodate each other's legitimate concerns and strive for a mutually beneficial agreement on the basis of mutual respect and equality.”