President TrumpDonald TrumpRobert Gates says 'extreme polarization' is the greatest threat to US democracy Cassidy says he won't vote for Trump if he runs in 2024 Schiff says holding Bannon in criminal contempt 'a way of getting people's attention' MORE on Friday announced he would increase tariffs on more than $500 billion in Chinese goods, marking a new escalation in his trade war with China that has reverberated across the U.S. stock market and global economy.
Trump unveiled his retaliatory measures on Twitter after the markets closed, capping a chaotic week throughout which the president vociferously downplayed speculation that a recession could be on the horizon.
Both countries have engaged in a series of escalating actions in their trade dispute, with China announcing earlier Friday that it would impose new reciprocal tariffs on $75 billion in U.S. automotive parts, farm products and other goods.
Trump, in turn, announced that $250 billion in Chinese goods he had intended to tax at 25 percent starting in September would now be taxed at 30 percent starting on Oct. 1, while another $300 billion in goods being taxed at 10 percent would attract a 15 percent rate.
“In the spirit of achieving Fair Trade, we must Balance this very unfair Trading Relationship. China should not have put new Tariffs on 75 BILLION DOLLARS of United States product,” Trump tweeted, writing that he believed Beijing’s tariffs were “politically motivated.”
Trump earlier in the week declared he was the “chosen one” to take on China on trade, a remark he said later Friday was made sarcastically.
But he triggered a drop in U.S. stock markets and stoked further concerns that the global economy could be headed for a recession after first responding to the China tariffs on Friday by saying American companies were “hereby ordered” to “find alternatives” to China. In doing so, he repeated his oft-used message that American firms should build their products in the United States.
“We don’t need China,” Trump tweeted. “This is a GREAT opportunity for the United States.
The president then spent part of Friday morning meeting with members of his economic team and had lunch with Secretary of State Mike PompeoMike PompeoState Department watchdog probing whether Trump aides took gifts meant for foreign officials Biden shows little progress with Abraham Accords on first anniversary Biden slips further back to failed China policies MORE. He remained largely silent on one of the most tumultuous days of his trade dispute with Beijing until announcing the tariffs in the early evening.
Claude Barfield, an expert in international trade policy at the American Enterprise Institute, said in an interview that Trump can't "order" U.S. companies to stop doing business with China, calling the morning announcement "willfully ignorant."
Trump later tweeted that he was exploring using the International Emergency Economic Powers Act. Under the 1977 law, Trump could declare a national emergency related to China in order to block U.S. firms from making some transactions in China.
Barfield predicted the widening trade war would continue to create uncertainty around the U.S. economy, which could potentially fuel a slowdown or a recession in the next six to 12 months.
"That’s not something that’s just psychological. It goes back into the board rooms in the sense that people, corporations can’t plan," Barifeld said.
The Dow Jones Industrial Average lost 2.4 percent on Friday, the S&P 500 dropped 2.6 percent and the Nasdaq fell 3 percent.
Trump has been banking his reelection on strong economic growth, and the White House has resisted acknowledging that a downturn is possible, citing improved consumer confidence and low unemployment numbers.
The president’s allies insisted amid the chaos Friday that Trump’s strategy would win out in the long run.
“The big picture here in terms of the macroeconomic effects is that we’ve had tariffs in place for over a year,” Peter Navarro, a trade adviser to Trump and fierce China critic, said on Fox News. “We know that China is bearing the burden of those tariffs by having to cut their prices … and we have seen absolutely no impact on consumers.
“So the people of this country, Capitol Hill, they’re behind President Donald J. Trump with his tough stand on China,” he added.
The president has made his trade war with China a central focus of his first term. The administration first levied tariffs more than a year ago in the face of congressional opposition. The dispute has since seen each side impose additional duties on the other, with negotiations between top officials taking place intermittently.
The two countries appeared close to a deal earlier this year before talks broke down. Trump has since taken a less urgent approach to coming to a final agreement, and there are few signs of a resolution in sight.
But Trump’s self-styled image as a master negotiator and his constant promises to improve U.S. trade deals have raised expectations for him to get something out of the lengthy feud with Beijing.
“In the end, he has to choose between accepting an agreement that’s weaker than he wants or continuing the war. And I think both open him to criticism,” said Bill Reinsch, who spent 15 years as a member of the U.S.-China Economic and Security Review Commission.
Trump's tweets about the economy and China on Friday came before he departed Washington for the annual Group of Seven (G-7) summit in Biarritz, France. The global economy and trade are poised to be at the top of the agenda, and Trump is likely to express gripes to European partners about what he views as unfair trade practices.
The president also again criticized Federal Reserve Chairman Jerome Powell, suggesting he was an “enemy” of the United States. Trump frequently cites Powell in his tweets, castigating him for keeping interest rates high.
In a speech Friday morning at the Fed’s annual gathering in Jackson Hole, Wyo., Powell signaled that the central bank was doing its best to steer U.S. monetary policy even in the face of an uncertain trade strategy.
“While monetary policy is a powerful tool that works to support consumer spending, business investment and public confidence, it cannot provide a settled rulebook for international trade,” Powell said in prepared remarks. “We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook and adjust policy to promote our objectives.”