The Dow Jones Industrial Average tumbled around 450 points Monday and the S&P 500 index was down by around 50 points as trading opened on a nervous Wall Street amid the trade tit for tat between the United States and China.
The Chinese government earlier Monday responded to President Trump’s hiked tariffs on its goods by announcing it will slap import fees on $60 billion in U.S.-made products starting June 1. The retaliation is a signal the world’s two leading economic powers could be barreling toward a full-scale trade war.
The brewing battle comes after Trump in March 2018 declared trade wars “easy to win” and “good” after slapping import fees on steel and aluminum.
“When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” the president tweeted on March 2, 2018. That came a day after his top spokeswoman admitted he gave no thought to how U.S. trade partners might retaliate.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!— Donald J. Trump (@realDonaldTrump) March 2, 2018
Trump started his morning on Monday threatening China over stalled trade talks and continued to contradict his top economic adviser about whether U.S. consumers are footing the bill for his tariffs on Beijing’s goods.
Since U.S. officials last week signaled years-long trade talks had stalled and may not be salvageable, Trump has shifted into a more defensive posture toward Beijing and Chinese President Xi Jinping after heaping praise on him and predicting a pact would be signed soon. On Monday, Trump escalated his rhetoric by warning Xi that he could press companies to move production operations from China to elsewhere in Asia.
“Their is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today,” the president wrote, misspelling there before urging Americans to “by” — misspelling buy — items from countries that are not subject to U.S. import fees or simply purchase American-made products.
Then came his threat.
“Many Tariffed companies will be leaving China for Vietnam and other such countries in Asia. That’s why China wants to make a deal so badly!”
But that tweet fails to reflect the fact that Chinese officials have given no indication in recent days they are desperate for the deal that was on the table prior to the chill in discussions. Trump also, again, contradicted himself. In the last eight days, he has tweeted multiple times that China is not looking to cut a deal with his administration because they would prefer to wait and see if the eventual Democratic presidential nominee defeats him in the 2020 election.
The president ignored those things and doubled down on his threat in another tweet as he began his week with a signature tweet storm.
“There will be nobody left in China to do business with. Very bad for China, very good for USA!” Trump wrote. “Therefore, China should not retaliate-will only get worse!”
Their is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today. This has been proven recently when only 4 points were paid by the U.S., 21 points by China because China subsidizes product to such a large degree. Also, the Tariffs can be…..— Donald J. Trump (@realDonaldTrump) May 13, 2019
….completely avoided if you by from a non-Tariffed Country, or you buy the product inside the USA (the best idea). That’s Zero Tariffs. Many Tariffed companies will be leaving China for Vietnam and other such countries in Asia. That’s why China wants to make a deal so badly!…— Donald J. Trump (@realDonaldTrump) May 13, 2019
..There will be nobody left in China to do business with. Very bad for China, very good for USA! But China has taken so advantage of the U.S. for so many years, that they are way ahead (Our Presidents did not do the job). Therefore, China should not retaliate-will only get worse!— Donald J. Trump (@realDonaldTrump) May 13, 2019
I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!— Donald J. Trump (@realDonaldTrump) May 13, 2019
But an article published this weekend by the Washington Post suggests the opposite, quoting several experts who said China is a hotbed for companies to set up production operations because the Asian country now buys 85 percent of what it produces — up from 71 percent 10 years ago.
Trump’s Monday Twitter screed also contradicted comments made Sunday by Lawrence Kudlow, White House chief economic adviser, who told “Fox News Sunday” that “both sides will suffer on this.”
Host Chris Wallace prompted Kudlow’s remarks when he said this: “It’s the American importers, the American companies that pay what, in effect, is a tax increase and oftentimes passes it on to U.S. consumers.”
“Fair enough,” Kudlow said. “In fact, both sides will pay. Both sides will pay in these things.”
The previously anti-tariff Kudlow has defended Trump’s import fees by saying sometimes a country has to turn to tariffs when another country is not an honest trading partner. He believes China has ceased to be one.
Defending his boss, Kudlow told Fox that the tariffs should get Xi’s attention because it will damage the Chinese economy “with respect to a diminishing export market.”
“This is a risk we should and can take,” he said, “without damaging our economy in any appreciable way.”
Trump campaigned hard in 2016 on rewriting U.S. trade pacts with friends and foes alike – especially China. His shifting message appears an attempt to avoid political damage if he cannot salvage some kind of deal with Xi’s government — including trying to shift blame to Democratic candidates who have not even been involved in the talks under his watch.