China tariffs will make US richer than free trade - Trump

Xi Jinping and Donald Trump.
Xi Jinping and Donald Trump. Photo credit: Reuters

US President Donald Trump says he is in no hurry to sign a trade deal with China as Washington imposed a new set of tariffs on Chinese goods and negotiators began a second day of last-ditch talks to try to salvage an agreement.

The United States early on Friday increased its tariffs on US$200 billion in Chinese goods to 25 percent from 10 percent, rattling financial markets already worried the 10-month trade war between the world's two largest economies could spiral out of control.

The move, which is expected to lead to Chinese retaliation, went into effect just hours before US trade representative Robert Lighthizer, US Treasury secretary Steven Mnuchin and Chinese Vice Premier Liu He started a second day of talks in Washington.

Liu was seen leaving the US trade representative's office near midday and it was not immediately clear if that signalled an end to the current round of negotiations.

In a series of morning 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.

"Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind," Trump said in one of the tweets.

Despite Trump's insistence China will absorb the cost of the tariffs, US businesses will pay them and likely pass them on to consumers. Consumer spending accounts for more than two-thirds of US economic activity.

Global stocks, which have fallen this week on the increased US-China tensions, came under renewed pressure on Friday. Major US stock indexes were down more than 1 percent and prices of US government debt rose. The US dollar slipped against a basket of currencies.

Trump, who has adopted protectionist policies as part of his 'America First' agenda and railed against China for trade practices he labels unfair, said the trade talks, originally due to end on Friday, could drag on beyond this week.

"We will continue to negotiate with China in the hopes that they do not again try to redo deal!" said Trump, who 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, which hurt US farmers at a time when their debt has spiked to its highest level in decades.

US Agriculture Secretary Sonny Perdue said on Friday that Trump had asked him to create a plan to support the farmers. The US Department of Agriculture already has rolled out up to US$12 billion to help offset farmers' China-related losses.

Under the latest US action, US Customs and Border Protection imposed a 25 percent duty on more than 5700 categories of products leaving China after 12.01am local time on Friday.

Seaborne cargoes shipped from China before midnight were not subject to the new tax as long as they arrived in the US prior to June 1. Those cargoes will be charged the original 10 percent rate.

"This delay might create an unofficial window during which the US and China can continue to negotiate," investment bank Goldman Sachs wrote in a note, adding that it was a "somewhat positive sign" that talks were continuing.

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.

He has also threatened to put new tariffs on another US$325 billion in Chinese imports.

Investors worry the escalating trade war will further damage a slowing global economy. The higher tariffs could reduce US gross domestic product by 0.3 percent and China's by 0.8 percent in 2020, consultancy Oxford Economics said.

Reuters