President Donald Trump’s escalation of trade threats against China reflects his belief that Washington increasingly has the upper hand in the dispute, administration officials said, adding he is prepared to withstand pressure from U.S. businesses that might suffer from the conflict.
Trump caught Chinese officials off guard with his announcement Monday evening about potential new tariffs. Should China retaliate against U.S. trade policies, the White House said, the U.S. would apply tariffs of 10% on as much as $400 billion in Chinese imports. China had earlier threatened to retaliate against the U.S.’s initial round of 25% tariffs on $50 billion on imports announced last week. The bulk of those tariffs go into effect July 6.
News of the new tariffs and the prospect of a trade war roiled global markets Tuesday. The Dow Jones Industrial Average DJIA, -1.15% fell 1.1% and the Shanghai Composite Index SHCOMP, -3.78% dropped 3.8% to its lowest level since mid-2016. Indexes in major exporters Germany and France slid more than 1%. Commodities prices also took a hit, with soybean prices dropping 2.2% to their lowest level in more than two years.
The White House’s tough stance represents the ascendancy, for now, of trade hawks in the administration, particularly White House senior trade adviser Peter Navarro and U.S. trade representative Robert Lighthizer. Both officials argue China represents a fundamental threat to the U.S. that needs to be countered, even at the cost of pain to the U.S. economy. “It’s clear that China has much more to lose” than the U.S. from a trade fight, said Navarro.
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