By Jim Zarroli
Traders and financial professionals work on the floor of the New York Stock Exchange on Monday. U.S. stock markets fell sharply at the open but crept higher as the day wore on after President Trump threatened to raise tariffs on imports from China.
Drew Angerer/Getty Images
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Drew Angerer/Getty Images
Updated at 10:00 p.m. ET
In a significant escalation of rhetoric, senior Trump administration officials accused Beijing of reneging on commitments it had already made in its on-going trade dispute with China, and they said they plan to increase tariffs on $200 billion in Chinese imports from 10% to 25% starting on Friday.
“Over the course of the last week or so, we have seen an erosion in commitments by China — I would say retreating from specific commitments that had already been made in our judgment,” said U.S. Trade Representative Robert Lighthizer at a briefing with reporters Monday afternoon. “That’s why the president referred to no re-negotiating in his tweet.”
Lighthizer said China’s attempts to re-negotiate were “in our view unacceptable. These were substantial and substantive changes and really, I would use the word ‘reneging’ on prior commitments.”
Treasury Secretary Steven Mnuchin said it became particularly clear over the weekend “with some new information that they were trying to go back on language that had been previously negotiated, very clear language that had the potential of changing the deal dramatically.”
Mnuchin said President Trump “is determined to re-balance the trade relationship” with China.
Neither Lighthizer nor Mnuchin were willing to detail the specific areas where the Chinese sought changes.
The Treasury secretary said the trade deal was “90 percent complete,” but there were still significant issues remaining that trade officials had hoped would be resolved by the end of this week.
They said the Chinese delegation, including Vice Premier Liu He, is still expected to arrive in Washington this week for talks slated for Thursday evening and Friday. At the same time, Lighthizer said he would likely put out notice of the increased tariffs on Tuesday and that they would go into effect on Friday morning.
Earlier on Monday, Trump’s latest threat to set higher tariffs on imports from China sent global financial markets tumbling.
Stock prices opened sharply lower in the United States on Monday — with the Dow Jones Industrial Average down more than 450 points — after Trump tweeted a vow Sunday to raise tariffs from 10% to 25% on $200 billion worth of imported Chinese goods as of Friday. The stocks of companies that trade heavily with China were especially hard hit.
The Shanghai composite index plunged 5.6% on Monday.
“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!” Trump said in a tweet Monday. (The goods trade deficit with China rose to a record $419.2 billion in 2018, but most economists say a deficit doesn’t say much about the health of the economy.)
But the stock markets crept higher as the day wore on, a sign that investors may be seeing Trump’s threat as a negotiating ploy that he is unlikely to follow through on. By the end of the day, the Dow was down only 66 points, or 0.25%.
Mnuchin said the prospect of stock market reaction was not a factor in the administration’s approach. He left open the possibility that the trade talks could get back on track if the Chinese were “prepared to meet the commitments they made to us previously.”
China and the United States have been locked in tough talks for months about trade, with the Trump administration demanding that Beijing address intellectual property theft, government business subsidies and currency manipulation.
Still, Trump’s tweets have “blindsided” Beijing officials, who were hoping the talks would lead to an elimination of tariffs, said Eswar Prasad, a senior professor of trade policy at Cornell University.
“But now it looks like the negotiations, at least on the U.S. side, will be about not imposing additional tariffs. So that changes the complexion of the negotiations quite significantly,” Prasad said.
The Chinese still have a strong incentive to strike a deal because their economy has been slowing, he said.
“The complication right now is that the Chinese cannot afford domestically to be seen as cravenly giving in to U.S. demands, which in the Chinese narrative are multiplying by the day,” Prasad added.
