WASHINGTON: US President Donald Trump said on Friday (May 10) that trade talks with China would continue even after Washington moved to hike tariffs on Chinese goods, avoiding the worst-case scenario of a complete breakdown in negotiations between the world's two largest economies.
Trump's remarks, which were made in a tweet, followed the end of talks in Washington between US Trade Representative Robert Lighthizer, US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He.
"Over the course of the past two days, the United States and China have held candid and constructive conversations on the status of the trade relationship between both countries," Trump said, praising his relationship with Chinese President Xi Jinping and saying the negotiations would carry on.
"In the meantime, the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!" Trump said.
Major US stock indexes, which had fallen sharply through the week as investors worried that the 10-month-old trade war could spiral out of control, reversed course to close higher on Friday after Mnuchin said the trade talks were "constructive." Yields on US government debt also drifted higher after the end of the talks.
Earlier on Friday, the United States increased its tariffs on US$200 billion of Chinese goods to 25 per cent from 10 per cent. China has said it will retaliate.
In earlier tweets, Trump defended the tariff hike and said he was in "absolutely no rush" to finalise a deal, adding that the US economy would gain more from the levies than any agreement.
Despite his insistence that China will absorb the cost of the tariffs, it's US businesses that will pay them and likely pass them on to consumers. Consumer spending accounts for more than two-thirds of US economic activity.
It may take three or four months for American shoppers to feel the pinch, but retailers will have little choice but to raise prices to cover the rising cost of imports before too long, economists and industry consultants say.
The Business Roundtable, a group of US corporate chief executive officers, said it was concerned rising tariffs would damage the American economy, though it said it supported US efforts to resolve structural trade issues with China.
Trump, who has adopted protectionist policies as part of his "America First" agenda and railed against China for trade practices he labels unfair, has accused Beijing of reneging on commitments it made during months of negotiations.
Following the US tariff hike, China's Commerce Ministry said it would take countermeasures but did not elaborate. China responded to Trump's tariffs last year with levies on a range of US goods including soybeans and pork.
US Agriculture Secretary Sonny Perdue said on Friday that Trump had asked him to create a plan to support American farmers. The US government already has rolled out up to US$12 billion to help offset their China-related losses.
"THREAT TO WORLD GROWTH"
The new 25 per cent US duty is being imposed on more than 5,700 categories of products, applied to products leaving China after 12.01am on Friday. The biggest sector affected is a US$20 billion-plus category of internet modems, routers and other data transmission devices. Printed circuit boards, furniture, lighting products, auto parts, vacuum cleaners and building materials also are high on the list.
Seaborne cargoes shipped from China before midnight were not subject to the new tax as long as they arrive in the United States prior to Jun 1. Those cargoes will be charged the original 10 per cent rate.
Trump gave US importers less than five days notice about his decision to increase the rate on US$200 billion worth of goods, which now matches the rate on a prior US$50 billion category of Chinese machinery and technology goods.
The higher tariffs could reduce US gross domestic product by 0.3 per cent and China's by 0.8 per cent in 2020, consultancy Oxford Economics said.
Trump has said he may put new tariffs on another US$325 billion in Chinese imports, which could severely disrupt global supply lines and derail an already-slowing world economy.
"There is no greater threat to world growth," French Finance Minister Bruno Le Maire said.
Although Trump has maintained that his trade policies will boost US manufacturing, some in the sector are concerned that the policies could backfire if the dispute with China is not resolved soon.
"We were mildly excited yesterday when we thought this was the end game," said Michael Haberman, president of Gradall Industries Inc in New Philadelphia, Ohio, which sells about 5 per cent of its machinery to China. "For us, the longer this continues the more dangerous it becomes."