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President Trump Threatens Additional Tariffs on Chinese Imports Ahead of Crucial Trade Talks

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Coresight Research

Key Points

On May 5, US President Donald Trump threatened to escalate tariffs on goods imported from China, just ahead of a planned series of meetings this week some were hoping would end the trade dispute.

  • Trump threatened to increase tariffs on $200 billion worth of Chinese goods from 10% to 25% on May 10, and impose 25% tariffs “shortly” on an additional $325 billion worth of Chinese goods.
  • There are rumors that Chinese officials might cancel this week’s talks in Washington that many expected to be the final round of negotiations, but during a Monday news conference, a spokesman for China’s Ministry of Foreign Affairs said the trade delegation is still preparing to travel to the US for the talks.
  • Stock markets fell on the news: Dow Jones Industrial Average futures declining around 66.47 points or 0.3% end of day Monday US local time, sliding more than 450 points earlier on Monday morning.

On May 5, 2019, US President Donald Trump threatened to increase tariffs on $200 billion worth of Chinese goods from 10% to 25% on May 10, and impose 25% tariffs “shortly” on an additional $325 billion worth of Chinese goods, in a Twitter message. The president said in another tweet that that trade talks with China continue, but complained that the talks are progressing too slowly as China “attempts to re-negotiate.”

The US imposed the following tariffs in 2018:

  • 25% tariff on $50 billion of high-tech goods, including machinery, aerospace, robotics and IT in July and August of
  • 10% tariff on $200 billion of Chinese goods in September 2018, including chemicals, building materials, furniture and some consumer electronics.

In 2018, the US imported around $539.5 billion of Chinese goods. If Trump follows through with tariffs on the additional $325 billion of Chinese goods plus $250 billion of Chinese goods already subject to the import tax, essentially all Chinese imported goods, including cell phones, computers, clothing, footwear and other consumer products, would be subject to tariffs.

Timing is Everything

Trump’s message came immediately before the what many hoped would be the final round of negotiations to finalize a US-China trade deal. China’s Vice Premier Liu He is scheduled to lead a 100-person delegation to Washington on May 8. The Wall Street Journal reported that China was considering cancelling the meeting, citing unidentified sources. However, in a Monday news conference, a spokesman for China’s Ministry of Foreign Affairs said that the trade delegation is still planning to go.

China cancelled a trip to Washington in late September 2018 after President Trump announced 10% tariffs on $200 billion in Chinese imports.

Stock markets fell after Trump’s announcement: Hong Kong’s Hang Seng Index fell 871.7 points or 2.9% during trading on May 6, while Shanghai Composite Index fell 5.6%. Dow Jones Industrial Average futures dropped around 66.47 points or 0.3% end of day Monday in the US, while declining more than 450 points on Monday morning. Furthermore, the Nasdaq-100 Index dropped 40.71 points or 0.5% and S&P 500 futures declined 13.17 points or 0.4% end of day Monday in the US.

Key Insights

The latest development adds uncertainty to US-China trade negotiations. However, the confirmation from China’s Ministry of Foreign Affairs that talks will proceed means a resolution could still be in the cards.

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