President Donald Trump has followed through on his threat to raise tariffs on $200 billion on Chinese goods in an effort to pressure Beijing in what looks like increasingly bleak trade negotiations.
The Trump administration increased tariffs from 10 percent to 25 percent on $200 billion in Chinese-made products. The taxes went into effect at 12:01 am Friday. China said it would retaliate, though it hasn’t given specifics.
The escalation didn’t bode well for the trade talks between the Trump administration and a Chinese delegation, led by Vice Premier Liu He, that were underway in Washington. And sure enough, though negotiations resumed Friday, they ended without any deal shortly before noon — leaving the prospect for any US-China breakthrough even farther away.
How we got here
The US and China have been negotiating for months, and Trump has repeatedly delayed imposing additional tariffs on Chinese goods, citing progress in negotiations between the two countries.
While it was always a little opaque what that progress looked like, Trump continued to practice restraint as the talks moved forward. In April, Trump bragged that the US and China were on the verge of an “epic” deal.
That all seems to be an epic failure — at least for now. Though China and the US appeared ready to finalize an agreement this week, multiple outlets reported that China had abruptly backed away from huge chunks of the 150-page draft deal last Friday, making changes and reneging on commitments throughout the entire document.
That led US officials to seriously question whether China would commit to any deal at all. “We’re moving backwards instead of forwards, and in the president’s view that’s not acceptable,” US Trade Representative Robert Lighthizer said Monday. “Over the last week or so, we have seen an erosion in commitments by China.”
Beijing also resisted the US demand that China change some of its laws as part of the trade deal, something American officials thought had already been agreed to by their Chinese counterparts. The legislation would have curbed China’s practice of forced technology transfers, where foreign companies doing business in China have to partner with local companies, which means sharing proprietary information. Beijing also reportedly wanted the Trump administration to lift its current tariff scheme much more rapidly than the US wanted.
Chinese officials rejected Washington’s characterization that they had exploded the deal, saying that the US had “foisted promises” on China.
Bonnie Glaser, China expert at the Center for Strategic and International Studies, told me that part of the problem is that everyone is struggling to figure out why China did such an about-face and reneged on its previous position.
She pointed to a few theories: a last-minute negotiating ploy, domestic pressure on President Xi Jinping, or China reading Trump’s attacks on the Federal Reserve as a sign the US economy isn’t as strong as he claims, as the Wall Street Journal reported.
But since it’s not clear for sure why China balked, it’s hard to see an immediate solution. “I just don’t think that we’re in a place where they will agree, ‘let’s have a new round of negotiations in a week or two,’” Glaser said. “There just doesn’t seem to be any basis right now to do that.”
Where do China and the US go from here?
Before the talks ended Friday, Trump described the discussions in a tweet as “congenial” — but said that there was “no need to rush” because “Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S.”
As many experts have repeatedly pointed out, Trump either still doesn’t understand how the tariffs he so adores work, or he’s lying about how they work.
As 101daily’s Emily Stewart put it back in November (because, yes, Trump is still saying the same wrong thing): “The US may be generating some revenue from tariffs, but billions of dollars aren’t pouring in. Moreover, a lot of the money that is made off of tariffs comes from US consumers — not Chinese companies.”
Trump’s additional tariffs will likely raise prices for consumers and may hurt manufacturers and others in the US who rely on parts made in China. What’s more, China’s retaliatory tariffs have already squeezed US exporters — most notably farmers — and Beijing has said it will introduce countermeasures.
And since China has said it will retaliate, there are renewed fears of a trade war between two of the world’s biggest economies. The long-term impact of a trade war is hard to gauge, but it will mostly likely be bad for both the US and China and potentially the rest of the global economy.
Where the US and China go from here is really the knottiest question. Liu told reporters Friday after the talks ended that negotiations would continue at some point in the future.
Trump later said on Twitter that the US and China have held “candid and constructive conversations” in the past two days. Talks would continue, Trump said, though he warned that tariffs “may or may not be removed depending on what happens with respect to future negotiations.”