President Trump sent the stock market tumbling early Monday with a weekend tweet threatening to levy more extensive tariffs on imported goods from China — launching another round of the seesaw between the president’s love of record Dow Jones closings and his firm belief in the merits of coercive trade policy. The specific assertions Trump made, including the idea that “China” bears the majority of the cost of the tariffs imposed on American buyers of Chinese goods, were mostly incorrect. After his tweet, the Dow plunged 450 points on Monday morning. But trade protection is something Trump has believed in for years, and it’s actually an issue on which he seems to have some support from Democrats on Capitol Hill — including Senate Minority Leader Chuck Schumer, who specifically urged him to “hang tough.” But talk of tariffs tends to rattle financial markets, both because the actual tariffs themselves are costly to the United States and because they inevitably raise the prospects of further rounds of tit-for-tat retaliation. China is valuable to American companies as a platform for manufacturing US-branded goods that are sold around the world and as a consumer market for American exports. Higher tariffs on some Chinese goods are not the end of the world, but a total rupture in US-China trade would be. Trump tweeted a mix of lies and threats The US and China have had a range of trade disputes for years, with longstanding tensions ratcheting up after Trump took office. Vice Premier Liu He was scheduled to arrive in Washington this week for talks on this subject, and around noon on Sunday, Trump decided to throw a twist into the plot with a couple of tweets threatening an escalation of American pressure. ....of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No! — Donald J. Trump (@realDonaldTrump) May 5, 2019 The idea that “China has been paying Tariffs to the USA” is a pretty wild misreading of the situation. The way a tariff works is that it’s basically like a sales tax, except instead of being paid on all goods, it’s paid only on imported goods. As with any kind of tax, a tax on Chinese-made goods is obviously bad for Chinese manufacturers. But as with any kind of tax, the financial price is paid in large part by consumers of Chinese-made goods — and, critically, by consumers of domestic goods that compete with Chinese-made ones. Once Trump levies tariffs on Chinese-made appliances, for example, not only does that tend to force Chinese manufacturers to raise prices, but it also tends to encourage American manufacturers to raise prices too since they no longer face as much price competition from China. As Emily Stewart has reported for Vox, Trump keeps saying this and experts keep saying he’s wrong. “It’s just another example of taking where there’s a tiny germ of truth and blowing it up to the point where it’s absurd for his own political purposes,” Michael Klein, a professor of international economic affairs at the Fletcher School at Tufts University, told her in November. Then Monday morning, Trump followed up with another classic Trumpism — simultaneously misstating the scale of the US trade deficit with China and totally mischaracterizing what it is. 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! — Donald J. Trump (@realDonaldTrump) May 6, 2019 The US trade deficit in goods with China was about $400 billion last year, not $500 billion, and we had a surplus in services. More to the point, when one country runs a trade deficit with another, that does not constitute “losing money.” When foreigners invest in the United States — buying shares of stock in American companies, buying the bonds sold by the US government, financing the construction of houses and office buildings — it generates a pool of money that has to go somewhere. Some of it goes back abroad in the form of American investment in foreign countries. But on balance, foreigners invest more in the United States than Americans invest abroad. That investment surplus allows Americans to buy more goods and services from abroad than we sell to foreigners — a trade deficit. These numbers need to balance out, and there’s nothing inherently good or bad about either of them. The fact that the United States tends to run a trade deficit is most likely a reflection of the fact that the American population is growing faster than that of other rich countries, so it’s a better place to invest. It’s not really clear if Trump genuinely doesn’t understand these points or just enjoys lying, but either way, he is very wedded to these two widely debunked talking points, and most people have sort of tuned it out at this point. But actions speak louder than words, and talk of tariffs has people nervous. The risk is escalation, not tariffs If Trump follows through on his threats, American consumer prices will rise modestly and it will be a smallish problem for most people and a larger windfall for a small number of people who run companies that compete with Chinese imports. There will also inevitably be specific problems and perversities. Trump has put tariffs on imported metals, for example, in order to boost American manufacturing. But many American manufacturers rely on imported metal, and this policy has been very detrimental to companies that make nails. Similarly, while broad tariffs on Chinese imports will help some American companies by undermining their Asian competitors, it will also hurt American companies that rely on Chinese suppliers to make components for them. All things considered, however, inflation is not a big problem in America right now, so higher prices are not the end of the world.<doc-sep>Wall Street plunged Monday morning after crucial trade talks with China appeared to collapse, renewing fears of an all-out trade war between the world's two largest economies. The Dow Jones Industrial Average fell by 450 points at the opening bell, with the S&P 500 down 1.55 percent and the Nasdaq sliding 2.2 percent. The market turmoil began Sunday after President Donald Trump slammed China in a surprise early morning tweet that said he would slap tariffs on almost all imported goods starting Friday. Futures on the Dow Jones Industrial Average immediately fell by over 500 points, with the S&P 500 and Nasdaq each sliding by 2 percent before markets opened. Chinese markets tanked by 6 percent. "The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!" Trump tweeted. "The 10% will go up to 25% on Friday. 325 Billions Dollars....of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%." Download the NBC News app for breaking news and politics Trump doubled down on that message on Monday, tweeting, "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!" 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! — Donald J. Trump (@realDonaldTrump) May 6, 2019 Chinese officials have threatened to completely withdraw from upcoming trade negotiations set for this week, according to CNBC. A 100-person delegation led by Chinese Vice Premier Liu He was scheduled to arrive in Washington on Wednesday. However, a spokesman for China’s Ministry of Foreign Affairs said Monday some of that team was still “preparing to travel to the U.S. for the trade talks.” The massive selloff triggered by Trump's tweets comes as markets were settling down after a slew of positive economic metrics assuaged fears of a global slowdown, and after comments from Washington that indicated the negotiations between the two sides were progressing well. Treasury Secretary Steven Mnuchin, who visited Beijing last month, along with U.S. Trade Representative Robert Lighthizer, had characterized the deal as "getting into the final laps." "I think both sides have a desire to reach an agreement," he told The New York Times in April. "We’ve made a lot of progress.” Vice President Mike Pence also conveyed an upbeat sentiment, telling CNBC on Friday, “I think President Trump remains very hopeful.” “This has all the makings of a complete disaster that could lead the stock market to crater this week and send those external risks to the U.S. economic outlook soaring,” said Chris Rupkey, chief financial economist at MUFG Union Bank. “For weeks now markets have been lulled to sleep on the U.S. trade war with China thinking an agreement was imminent. No more.”<doc-sep>See the recovery efforts in Gaza as ceasefire appears to hold 'Is everything I'm trying to do pointless? ': Syrians helpless in face of 'sham' election Report: US companies may have benefited from forced labor of Uyghurs Residents stand near stalls along a road amidst debris while strong winds batter Balasore district in Odisha state on May 26, 2021 as Cyclone Yaas barrels towards India's eastern coast in the Bay of Bengal. (Photo by Dibyangshu SARKAR / AFP) (Photo by DIBYANGSHU SARKAR/AFP via Getty Images) France's President Emmanuel Macron (L) and Rwanda's President Paul Kagame speak as they walk in the grounds of The Presidential Palace in Kigali on May 27, 2021, after their press conference and prior to their official luncheon. - French President Emmanuel Macron arrived in Rwanda on May 27, 2021, for a highly symbolic visit aimed at moving on from three decades of diplomatic tensions over France's role in the 1994 genocide in the country. Macron is the first French leader since 2010 to visit the East African nation, which has long accused France of complicity in the killing of some 800,000 mostly Tutsi Rwandans. (Photo by Ludovic MARIN / AFP) (Photo by LUDOVIC MARIN/AFP via Getty Images) A trader works at his desk on the floor of the New York Stock Exchange (NYSE) after the opening Bell on March 4, 2019 in New York City. (CNN) — The top US trade negotiator said Monday that the Trump administration will be moving forward on President Donald Trump’s threat to escalate tariffs on $200 billion of Chinese goods effective Friday. Speaking to reporters in Washington, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said China reneged on previous agreements over the weekend, derailing months of progress toward a detailed trade agreement between the world’s two largest economies. As of Friday, penalties on $200 billion of Chinese goods will be lifted to 25% from 10%, as Trump tweeted on Sunday. “We felt like we were on track to get somewhere,” Lighthizer told reporters. “We tried to accommodate changes in the text, but these are substantial and substantive changes.” He described the changes as “reneging on prior commitments.” The news comes ahead of a delegation of Chinese negotiators arriving in Washington later this week. The two men said the move to press ahead with tariffs is not a signal of a breakdown of talks. The Treasury secretary declined to speculate on whether the two countries would be able to close the gap before the end of the week. Chinese Vice Premier Liu He will still be leading the delegation and arriving in Washington on Thursday, the US officials said. “It did become particularly clear with some new information they were trying to go back on very clear language that had the potential to change the deal dramatically,” said Mnuchin. He added: “This is a big change in direction for the negotiation.” After repeatedly promising that the US-China talks were in their final stages, Trump threw the negotiations into question over the weekend with a series of tweets threatening new tariffs. US markets recovered Monday after an initial slide in Asian equity markets in Asia tumbled and US futures slid. Trump continued his warnings on Monday — two days before China’s top negotiator was due to arrive in Washington for what many believed would be the completion of a deal. “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,” Trump tweeted on Monday. “Sorry, we’re not going to be doing that anymore!” US officials said they were awaiting word from Beijing on the plans for the Chinese delegation that was supposed to arrive later this week. Earlier Monday, a Chinese government spokesman said they were still planning to move forward with the talks, set to begin Wednesday, but a US official said it was still unclear whether it will be led by Liu He, the vice premier and chief trade negotiator, and whether this round of negotiations will be truncated after Trump’s tweets threatening additional tariffs. The Chinese delegation was set to include more than 100 people, one official said, and was viewed by many involved with the talks as a final step before a summit encounter between Trump and his Chinese counterpart. Trump was trying to rattle China with the tweet, according to the official, who said the last round of talks ended with some uncertainty on how much China would be willing to change its economic practices as part of a deal. “The President is, I think, issuing a warning here, that, you know, we bent over backwards earlier, we suspended the 25% tariff to 10 and then we’ve left it there. That may not be forever if the talks don’t work out,” White House economic adviser Larry Kudlow told Fox News on Sunday. While the Chinese have agreed to make some changes to their economic practices in principle, they have been reluctant to see them codified in writing as part of the trade agreement, the official said. Trump received word on those developments during a briefing from his top trade negotiators last week, a US official said, describing the news as “disappointing.” Trump is being advised by some of his aides that accepting a deal without those changes included would appear weak and politically expedient. And he is growing inpatient with the back-and-forth talks after extending an initial March 1 deadline by months. Trump has hoped to strike a deal that would boost markets and help along a strong US economy, believing his political prospects are closely tied to Wall Street and Americans’ economic optimism. Some inside his administration have feared that could result in a President overly thirsty for a deal, even one with unfavorable terms. Yet Trump has consistently said he will only sign an agreement if it is good for the United States and resolves long-standing trade disputes.<doc-sep>An investor at a brokerage in Shanghai on May 6, 2019. Contrary to global conventions, China’s stock markets represent losses and declines in green, and uses red to represent gains and advances. Photo: REUTERS<doc-sep>
WASHINGTON (Reuters) - President Donald Trump dramatically increased pressure on China on Sunday to reach a trade deal, saying he would hike U.S. tariffs on $200 billion worth of Chinese goods this week and target hundreds of billions more soon. The move marked a major escalation in tensions between the world’s largest economies and a shift in tone from Trump, who had cited progress in trade talks as recently as Friday. Stock markets sank and oil prices tumbled as negotiations were thrown into doubt. The Wall Street Journal reported that China was considering cancelling this week’s trade talks in Washington in light of Trump’s comments, which took Chinese officials by surprise. A less than rosy update from United States Trade Representative Robert Lighthizer, including details that China was pulling back from some previous commitments, prompted Trump’s decision. “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!” Trump said in a tweet. U.S. officials did not weigh in on whether China would attend this week’s talks. The White House and the U.S. Trade Representative’s Office declined to comment. China’s commerce ministry did not immediately respond to a request for comment. “The atmosphere of the negotiations has changed,” said a Chinese official with knowledge of the situation. Whether the talks would proceed and how they would proceed are issues that are now being re-evaluated, the official told Reuters on condition of anonymity. “All that depends on the attitude of the United States,” the official said. The editor of an influential, Chinese state-run newspaper said Vice Premier Liu He was unlikely to go. “Let Trump raise tariffs. Let’s see when trade talks can resume,” Hu Xijin, editor-in-chief of the tabloid the Global Times, tweeted. The newspaper is published by the ruling Communist Party’s People’s Daily, but it is not considered an official publication and does not speak for the government. Chinese media outlets have been told not to independently report on Trump’s overnight tweets or tweet about them, and instead adhere to any report from the official Xinhua news agency, said a source with direct knowledge of the matter. MARKET TURBULENCE Global financial markets, which had been expecting news of a trade deal soon, went into a tailspin. U.S. equity futures fell more than 2 percent and stocks across trade-reliant Asia tumbled, with China’s main indexes plunging 5 percent. “There is still a question of whether this is one of the famous Trump negotiation tactics, or are we really going to see some drastic increase in tariffs,” said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia. If it’s the latter, we’ll see massive downside pressure across all markets.” Slideshow ( 3 images ) Trump said tariffs on $200 billion of goods would increase to 25 percent on Friday from 10 percent, reversing a decision he made in February to keep them at the 10 percent rate thanks to progress between the two sides. The president also said he would target a further $325 billion of Chinese goods with 25 percent tariffs “shortly,” essentially covering all products imported to the United States from China. Mindful of his 2020 re-election bid, Trump suggested the measures were not leading to price increases for U.S. consumers. “The Tariffs paid to the USA have had little impact on product cost, mostly borne by China,” he tweeted. Tariffs on Chinese goods are actually paid to the United States by the companies importing the goods, and most of those companies are U.S.-based. American businesses, while supportive of Trump’s crackdown on China’s trade practices, are eager for the tariffs to be removed, not expanded. Slideshow ( 3 images ) “Raising tariffs means raising taxes on millions of American families and inviting further retaliation on American farmers,” said Christin Fernandez, a spokeswoman for the Retail Industry Leaders Association. Nevertheless, the president’s aggressive strategy drew rare bipartisan support from U.S. Senate Democratic leader Chuck Schumer, who urged Trump to “hang tough” in a tweet: “Don’t back down. Strength is the only way to win with China.” One Chinese trade expert said recent signs of resilience in both economies were breeding over-confidence. “The urgency is gone. So, it’s likely to see a longer trade war,” the expert said, speaking on condition of anonymity citing the sensitivity of the topic. The trade war resulted in billions of dollars of losses for both sides in 2018, hitting industries including autos, technology - and above all, agriculture, while inflicting collateral damage on export-reliant economies and companies from Japan to Germany.