Trump Says No Rush to Reach Deal with China as Trade War Escalates

Photo: MOLPIX / Shutterstock

By Susan Heavey and Humeyra Pamuk WASHINGTON, May 10 (Reuters) – U.S. President Donald Trump on Friday said he was in no hurry to sign a trade deal with China as Washington imposed a new set of tariffs on Chinese goods and negotiators ended two days of talks to try to salvage an agreement.

The United States early on Friday increased its tariffs on $200 billion in Chinese goods to 25% from 10%, rattling financial markets already worried the 10-month trade war between the world’s two largest economies could spiral out of control. China is expected to retaliate.

The tariffs went into effect just hours before U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He held a second day of talks in Washington. The session ended after about 90 minutes.

“They were constructive discussions,” Mnuchin told reporters as he left Lighthizer’s offices near midday. Mnuchin said the negotiations were done for the day, CNBC reported.

Liu, the lead Chinese negotiator, told reporters at his hotel in Washington that the talks had gone “fairly well,” Bloomberg reported.

The two sides have agreed to meet again in Beijing in the future, the editor-in-chief of China’s state-run Global Times newspaper said in a tweet, citing what he described as an “authoritative source.”

In a series of morning tweets, Trump defended the tariff hike and said he was in “absolutely no rush” to finalize a deal, adding that the U.S. economy would gain more from the levies than any agreement.

“Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind,” Trump said in one of the tweets.

Despite Trump’s insistence that China will absorb the cost of the tariffs, U.S. businesses will pay them and likely pass them on to consumers. Consumer spending accounts for more than two-thirds of U.S. economic activity.

Global stocks, which have fallen this week on the increased U.S.-China tensions, came under renewed pressure on Friday. Major U.S. stock indexes opened sharply lower but pared losses after Friday’s talks ended. Prices of U.S. government debt rose while the U.S. dollar slipped against a basket of currencies.

Trump, who has adopted protectionist policies as part of his “America First” agenda and railed against China for trade practices he labels unfair, said the trade talks, originally due to end on Friday, could drag on beyond this week.

“We will continue to negotiate with China in the hopes that they do not again try to redo deal!” said Trump, who has accused Beijing of reneging on commitments it made during months of negotiations.

Following the U.S. tariff hike, China’s Commerce Ministry said it would take countermeasures but did not elaborate.

China’s central bank said it was fully able to cope with any external uncertainty.

China responded to Trump’s tariffs last year with levies on a range of U.S. goods including soybeans and pork, which has hurt U.S. farmers at a time when their debt has spiked to the highest level in decades.

U.S. Agriculture Secretary Sonny Perdue said on Friday that Trump had asked him to create a plan to support the farmers. The U.S. Department of Agriculture already has rolled out up to $12 billion to help offset farmers’ China-related losses.

‘NO GREATER THREAT’

U.S. authorities imposed the 25% duty on more than 5,700 categories of products leaving China after 12:01 a.m. EDT (0401 GMT) on Friday. The biggest sector affected is a $20 billion-plus category of internet modems, routers and other data transmission devices. Printed circuit boards, furniture, lighting products, auto parts, vacuum cleaners and building materials also are high on the list.

Seaborne cargoes shipped from China before midnight were not subject to the new tax as long as they arrived in the United States prior to June 1. Those cargoes will be charged the original 10% rate.

“This delay might create an unofficial window during which the U.S. and China can continue to negotiate,” investment bank Goldman Sachs wrote in a note, adding that it was a “somewhat positive sign” that talks were continuing.

Trump gave U.S. importers less than five days notice about his decision to increase the rate on $200 billion worth of goods, which now matches the rate on a prior $50 billion category of Chinese machinery and technology goods.

He has also threatened to put new tariffs on another $325 billion in Chinese imports.

Investors worry the escalating trade war will further damage a slowing global economy. The higher tariffs could reduce U.S. gross domestic product (GDP) by 0.3% and China’s by 0.8% in 2020, consultancy Oxford Economics said.

“There is no greater threat to world growth,” French Finance Minister Bruno Le Maire said on Friday.

Many business groups have opposed the tariffs, saying they will be devastating for companies and lead to higher prices for consumers across a range of products.

“Our industry supports more than 18 million U.S. jobs – but raising tariffs will be disastrous,” Gary Shapiro, chief executive of the Consumer Technology Association, a U.S. trade group, said in a statement.

It may take three or four months for American shoppers to feel the pinch, but retailers will have little choice but to raise prices to cover the rising cost of imports before too long, economists and industry consultants say.

The U.S.-China battle also has raised alarm in Europe, which is grappling with an economic slowdown and the ripple effects of Britain’s decision to leave the European Union. There are concerns Trump will follow through on a threat to impose tariffs on imported cars and auto parts, an important sector for Europe. (Reporting by David Lawder, Jeff Mason, Susan Heavey and Humeyra Pamuk in Washington, and Yawen Chen, Michael Martina, Ryan Woo, Ben Blanchard and Kevin Yao in Beijing, and Xihao Jiang in Shanghai, and Philip Blenkinsop in Brussels and Kanishka Singh in Bengaluru; Writing by Paul Simao; Editing by Simon Webb, Simon Cameron-Moore, Kim Coghill and Bill Trott)

(c) Copyright Thomson Reuters 2019.