Trump presses US companies to close China operations, slaps 5% tariff in retaliation

President Donald Trump said on Friday he was ordering US companies to look at ways to close their operations in China and make more of their products in the United States instead, sending US markets down sharply in a new rhetorical strike at Beijing as trade tensions mounted.

Trump cannot legally compel US companies to abandon China immediately. He gave no detail on how he might proceed with any such order, although he said he would be offering a response later on Friday to tariffs on $75 billion in American products announced by China earlier in the day.

The US President Donald Trump on Friday said he was ordering US companies to look at ways to close their operations in China and make more of their products in the United States instead, sending US markets down sharply in a new rhetorical strike at Beijing as trade tensions mounted.

However, on Friday he lashed back at a new round of Chinese tariffs by heaping an additional 5% duty on some $550 billion in targeted Chinese goods in the latest tit-for-tat trade war escalation by the world’s two largest economies.

Trump’s move, announced on Twitter, came hours after China unveiled retaliatory tariffs on $75 billion worth of US goods, prompting the president earlier in the day to demand US companies move their operations out of China.
Trump’s tariff response was announced after markets closed on Friday, leaving potentially more damage for next week.

“Sadly, past Administrations have allowed China to get so far ahead of Fair and Balanced Trade that it has become a great burden to the American Taxpayer,” Trump said on Twitter. “As President, I can no longer allow this to happen!”

He said the United States would raise its existing tariffs on $250 billion worth of Chinese imports to 30% from the current 25% beginning on Oct. 1, the 70th anniversary of the founding of the communist People’s Republic of China.

At the same time, Trump announced an increase in planned tariffs on the remaining $300 billion worth of Chinese goods to 15% from 10%. The United States will begin imposing those tariffs on some products starting Sept. 1, but tariffs on about half of those goods have been delayed until Dec. 15.

The US Trade Representative’s office confirmed the effective dates but said it would conduct a public comment period before imposing the 30% tariff rate on Oct. 1.

US business groups reacted angrily to the new tariff hike.

“It’s impossible for businesses to plan for the future in this type of environment. The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?” said David French, a senior vice president for the National Retail Federation.

The US dollar rose sharply against the Chinese yuan, U.S. stock markets fell 2% and oil prices dropped on Trump’s latest salvo against China. Apple Inc fell 4%, while General Motors and Intel Corp each fell 3%.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA,” Trump wrote on Twitter. “We don’t need China and, frankly, would be far better off without them.”

The U.S. Chamber of Commerce rebuffed Trump’s suggestion and urged China and the United States to quickly reach a deal in the long-running trade issue. “While we share the president’s frustration, we believe that continued, constructive engagement is the right way forward,” the group said.

Experts said tax policy changes and sanctions could be used to restrict or reduce U.S. business activity in China, but it would take years to disentangle the world’s two largest economies. The consequences of a complete break to the world economy would be severe, they said.

China, for instance, holds $1.11 trillion in U.S. Treasury securities.

For many products sold in the United States, there are few alternatives to Chinese production, and shifting production for major goods produced there could take years and be expensive.

American companies could also sue the U.S. government in response to any order to shutter plants in China. The most effective option for Trump would be to restrict federal procurement from any companies that do business in China.

That would hit companies like Boeing Co, Apple and General Motors, which are both big U.S. contractors and have large business interests in China.

Bill Reinsch, a former senior Commerce Department official, said Trump had limited options to force U.S. companies to quit China, and it would make little economic sense.

“We can’t be a market economy and do that,” Reinsch said. “No one’s going to pay attention to it anyway. Companies do what they’re going to do.”

Many U.S. companies have already begun moving some operations out of China due to rising labour costs. But others, including General Motors, have large plants there to supply the Chinese market. They would resist any pressure to close their facility there, given the size and importance of the Chinese market, Reinsch said.

Last week, Trump backed off his Sept. 1 deadline for 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods.

The U.S. Trade Representative’s Office delayed tariffs on more than half the $300 billion in Chinese-made goods telling companies the delay covered product categories where China supplies more than 75 percent of total U.S. imports.

lashed back at a new round of Chinese tariffs by heaping an additional 5% duty on some $550 billion in targeted Chinese goods in the latest tit-for-tat trade war escalation by the world’s two largest economies.

Trump’s move, announced on Twitter, came hours after China unveiled retaliatory tariffs on $75 billion worth of US goods, prompting the president earlier in the day to demand US companies move their operations out of China.
Trump’s tariff response was announced after markets closed on Friday, leaving potentially more damage for next week.

“Sadly, past Administrations have allowed China to get so far ahead of Fair and Balanced Trade that it has become a great burden to the American Taxpayer,” Trump said on Twitter. “As President, I can no longer allow this to happen!”
He said the United States would raise its existing tariffs on $250 billion worth of Chinese imports to 30% from the current 25% beginning on Oct. 1, the 70th anniversary of the founding of the communist People’s Republic of China.
At the same time, Trump announced an increase in planned tariffs on the remaining $300 billion worth of Chinese goods to 15% from 10%. The United States will begin imposing those tariffs on some products starting Sept. 1, but tariffs on about half of those goods have been delayed until Dec. 15.

The US Trade Representative’s office confirmed the effective dates but said it would conduct a public comment period before imposing the 30% tariff rate on Oct. 1.

US business groups reacted angrily to the new tariff hike.

“It’s impossible for businesses to plan for the future in this type of environment. The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?” said David French, a senior vice president for the National Retail Federation.

The US dollar rose sharply against the Chinese yuan, U.S. stock markets fell 2% and oil prices dropped on Trump’s latest salvo against China. Apple Inc fell 4%, while General Motors and Intel Corp each fell 3%.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA,” Trump wrote on Twitter. “We don’t need China and, frankly, would be far better off without them.”

The US Chamber of Commerce rebuffed Trump’s suggestion and urged China and the United States to quickly reach a deal in the long-running trade issue. “While we share the president’s frustration, we believe that continued, constructive engagement is the right way forward,” the group said.

Experts said tax policy changes and sanctions could be used to restrict or reduce U.S. business activity in China, but it would take years to disentangle the world’s two largest economies. The consequences of a complete break to the world economy would be severe, they said.

China, for instance, holds $1.11 trillion in US Treasury securities.

For many products sold in the United States, there are few alternatives to Chinese production, and shifting production for major goods produced there could take years and be expensive.

American companies could also sue the US government in response to any order to shutter plants in China. The most effective option for Trump would be to restrict federal procurement from any companies that do business in China.

That would hit companies like Boeing Co, Apple and General Motors, which are both big U.S. contractors and have large business interests in China.

Bill Reinsch, a former senior Commerce Department official, said Trump had limited options to force U.S. companies to quit China, and it would make little economic sense.

“We can’t be a market economy and do that,” Reinsch said. “No one’s going to pay attention to it anyway. Companies do what they’re going to do.”

Many U.S. companies have already begun moving some operations out of China due to rising labour costs. But others, including General Motors, have large plants there to supply the Chinese market. They would resist any pressure to close their facility there, given the size and importance of the Chinese market, Reinsch said.

Last week, Trump backed off his Sept. 1 deadline for 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods.

The U.S. Trade Representative’s Office delayed tariffs on more than half the $300 billion in Chinese-made goods telling companies the delay covered product categories where China supplies more than 75 percent of total U.S. imports.