Beijing • President Donald Trump showed no sign Wednesday of backing down from an escalating trade confrontation with China, even as financial markets wobbled and American farmers and manufacturers warned that he was inviting a damaging commercial clash.
Hours after the Chinese government announced plans to match the president’s tariffs on $50 billion in imported Chinese goods with import levies on American soybeans, cars and airplanes, Trump fired off a pair of bellicose tweets.
“When you’re already $500 Billion DOWN, you can’t lose!” he wrote in a possible reference to last year’s $566 billion U.S. deficit in goods and services trade.
Wall Street was less sanguine. The Dow Jones industrial average fell more than 500 points in early trading before rebounding by midday. Soybean prices also plunged more than 5 percent as traders grappled with the possible closure of a market that bought roughly half of U.S. exports of the commodity last year.
Commerce Secretary Wilbur Ross, meanwhile, called the investor reaction overblown and signaled that the administration may seek to resolve the trade dispute at the bargaining table. The U.S. tariffs won’t take effect before the end of May after a period for public comment.
“Even shooting wars end with negotiations,” Ross told CNBC. “So it wouldn’t be surprising at all if the net outcome of all this is some sort of negotiation; whether it happens by May or some other time, that’s another whole question.”
Farm groups Wednesday joined the U.S. Chamber of Commerce and the National Association of Manufacturers in opposing the president’s reliance upon tariffs as a tool to change Chinese industrial policies. The administration wants China to stop forcing U.S. companies to share their technology with Chinese partners, stealing trade secrets via cybertheft and acquiring U.S. high-tech companies in the open market.
Former Sen. Max Baucus, who co-chairs Farmers for Free Trade, said the Chinese tariffs will hurt “harvesters, processors, truck drivers, rail workers, and main street businesses that rely on a strong agricultural economy” along with farmers.
“We urge the administration to reconsider escalating this trade war,” said Baucus, who served as President Obama’s U.S. ambassador to China.
Once imposed, the Chinese measures are not expected to have a significant impact upon the broader U.S. economy. “In isolation, 25 percent tariffs on $50B of goods is not a big deal from a macro perspective — [it] adds less than 0.1 percent to the cost structure of the economy,” said economist Jim O’Sullivan of High-Frequency Economics. “The issue is whether there is retaliation to the retaliation and so on.”
Earlier, the president blamed his predecessors for the lopsided U.S.-China trade relationship. “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!” he wrote.
China responded to Trump’s new tariffs by threatening its own import taxes on 106 U.S. products. Under the plan announced earlier Wednesday, Beijing would slap 25 percent levies on a range of U.S. goods worth about $50 billion. Chinese officials did not set a date for implementation, saying it will depend on whether the U.S. president implements his tariff plans.
The Chinese announcement came hours after the White House unveiled plans for tariffs on $50 billion in Chinese imports across 1,300 categories, with 25 percent levies on a variety of Chinese goods.
Though a response from Beijing was widely expected, the speed of the announcement came as a surprise, deepening fears of a rapid escalation.
At a news conference Wednesday, Chinese officials did little to stem talk of “war” but stressed that Beijing is willing to work with the White House.
“If someone wants a trade war, we will fight to the end. If someone wants to talk, our door is open,” said Wang Shouwen, vice minister of commerce.
Zhu Guangyao, vice minister of finance, said both sides were “showing their swords and making demands” but needed to get back to the negotiating table.
Though the dollar amounts targeted by both sides are similar — $50 billion — the focus on U.S. soybean exports by China could have a particularly big impact on the United States.
Soybeans are the top U.S. agricultural export to China, and U.S. soybean farmers and their allies fought hard to prevent the tariffs, something Zhu noted in the news conference.
The current U.S. ambassador to China, Terry Branstad, is the former governor of Iowa, a state that could be hit hard. In March, representatives from the Iowa Soybean Association visited him in China to plead their case, according to a Chinese report.
Christopher Balding, an associate professor at the HSBC Business School in Shenzhen, said that comparing the U.S. and Chinese lists showed China’s willingness to target products such as soybeans, automobiles and planes that could create political problems for Trump.
“Even though the numbers between China and the U.S. are comparable, it seems clear that China is trying to twist the knife,” he said. “This is a warning that ‘we are willing to fight harder and inflict more pain that you are.’ ”
The goal may be to get U.S. voters to stop Trump from pressing ahead. Farm states generally backed Trump in the 2016 election, and their exports could be hurt.
“China is stirring up U.S. farmers to put pressure on the White House,” said Shen Dingli, deputy dean of the Institute of International Affairs at Shanghai’s Fudan University.
Wednesday’s announcement means there are now two U.S.-China trade battles playing out.
In late March, the United States announced steel and aluminum tariffs that would penalize China to the tune of about $3 billion a year. On Monday, China returned fire by imposing similar measures on $3 billion worth of U.S. pork, fruit and other items.
Then, on Tuesday, the White House went ahead with tariffs that target manufacturing technology, arguing that Chinese trade practices have unfairly hurt U.S. business.
Trump has argued that the Chinese government forces U.S. companies to surrender proprietary technology to gain access to the Chinese market, resulting in the theft of trade secrets.
But critics say the U.S. president’s protectionist trade moves will hurt the global supply chains of U.S. companies and could lead to higher prices for U.S. consumers.
The question now is if Trump will move ahead with the tariffs as announced or change course, potentially going to the table.
Shi Yinhong, a professor of international affairs at Renmin University in Beijing, said that China’s move has signaled the country’s willingness to go “tit for tat” in a trade war.
Today’s move is “a rising wind that foretells a storm,” he said, adding that whether that storm comes “depends on President Trump.”
The Washington Post’s Luna Lin, Amber Ziye Wang and Yang Liu contributed from Beijing.