China retaliates by upping tariffs, sending markets spiraling
On Friday, 10 May, the United States formally implemented higher tariffs on USD 200 billion (EUR 178.6 billion) of Chinese goods – a move that had been announced by U.S. President Donald Trump on Sunday, 5 May.
On Monday, 13 May, China responded with its own announcement that it will raise tariffs on USD 60 billion (EUR 53.4 billion) of American goods from 10 percent to 20 or 25 percent.
The back-and-forth occurred after negotiations between the two countries appeared to have suffered a setback on 10 May after talks in Washington D.C. failed to produce any agreement on reducing the trade tensions.
The announcements by both sides appeared to leave some time before the new round of tariffs are implemented, giving negotiators more time to strike a deal. The Chinese Finance Ministry said its new rates will not go into effect until 1 June, and the new U.S. tariffs will not affect goods that left China before they were announced.
But even as Trump’s chief economic advisor, Larry Kudlow, said there is a “strong possibility” Trump will meet with Chinese President Xi Jinping at the G-20 summit in Osaka, Japan from 28 to 29 June, U.S. Trade Representative Robert Lighthizer said the U.S. had initiated the process of placing tariffs on all remaining Chinese goods not currently subject to tariffs.
“The President also ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately USD 300 billion [EUR 267 billion].”
The first step in that process, a period of public comments, will open soon, Lighthizer said.
The U.S. Dow Jones Industrial Average was down more than 710 points, or 2.75 percent, at around 2:30 p.m. on Monday, 13 May. After the announcement of the retaliatory Chinese tariffs, Asian and European markets also tumbled, with the Shanghai Composite losing 1.2 percent of its value, the Nikkei 225 index dropping 0.7 percent, and the German DAX falling 0.7 percent, and the French CAC 40 sliding down 1.2 percent in value. The Chinese yuan fell to RMB 6.88 to the dollar, its lowest value in more than four months.