China announced Monday that it will raise tariffs on more than $60 billion in American goods in response to a threat from the Trump White House to dramatically increase tariffs on Chinese products entering the United States from 10% to 25%.
President Donald Trump promised major changes in trade with China as part of his 2016 presidential campaign platform, and the administration has been working on those changes for several years now, hoping to “even the playing field” for Americans — particularly American farmers — who pay for Chinese goods, but whose goods don’t command the same high prices in China.
President Trump’s idea, CNBC reports, was to threaten a dramatic tariff increase on Chinese goods — a hike from 10% to 25% on $200 billion in Chinese products. Sensing that the Chinese would prefer not to see American demand for their products drop, Trump assumed that the Chinese would rush to the bargaining table to save the relationship.
For a time, that worked, but late last week, trade negotiations broke apart, and both countries walked away from the bargaining table without inking a new deal.
The White House claims that the trade relationship between the two countries remains warm and that the break in negotiations is only temporary, but neither country has agreed to restart trade talks.
On Sunday, President Donald Trump tweeted that he was officially imposing the new tariffs and, in a series of social media missives that were later deleted, explained why he felt that tariffs were an even more appropriate economic result than a renegotiated trade partnership.
“[T]ariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind,” the president tweeted.
China, apparently, didn’t see it that way. Monday morning, China announced a series of tariff increases, in turn raising prices on “a wide range of U.S. products, including coffee, beef, salmon, flowers and some fruits and vegetables,” according to USA Today.
Things immediately got rough for the United States’ economy.
“The Dow Jones industrial average dropped 566 points, or 2.2%, to 25,372 in early trading, while the Standard & Poor’s 500 index lost 67 points, or 2.3%, to 2,813. The tech-heavy Nasdaq, which has been the most vulnerable to trade tensions, plunged 243 points, or 3.1%, to 7,674 Monday morning,” USA Today continued.
And the Trump administration may not be done. There are, reportedly, plans in the works to introduce a second wave of 25% tariffs on around $325 billion in Chinese goods that currently go untaxed.
Despite the volatility, though, experts who spoke to both CNBC and USA Today believe that the tariff war is probably temporary and that it’s simply emblematic of the pains of an extended negotiation. Both sides, they say, intend to “hurt’ for a prescribed period of time — a “quiet period” — before returning to the bargaining table in a few weeks.