Trump imposes tariffs on $300bn more Chinese goods in sharp escalation of trade war

US president's surprise announcement sends global stock markets plunging as fears for world economy grow

Ben Chapman
Friday 02 August 2019 10:50 BST
Trump meets with Xi Jinping at the G20 summit in June
Trump meets with Xi Jinping at the G20 summit in June (Reuters)

Donald Trump has hit China with tariffs on an extra $300bn (£248bn) worth of imports in a major escalation of the trade war between the two nations that threatens the health of the global economy.

The US president’s announcement sent stock markets around the world into a tailspin, with the FTSE 100 dropping 2 per cent within minutes of opening on Friday morning.

That followed plunges across Asian markets earlier in the day as rising tensions between Washington and Beijing spooked investors.

Tokyo’s main index slumped 2.5 per cent, while Hong Kong’s Hang Seng benchmark was down 2.3 per cent on the day. Billions of dollars were also wiped off shares in China, Korea and Australia.

Mr Trump’s latest round of 10 per cent tariffs on Chinese goods entering the US, including smartphones and laptops, took markets by surprise, analysts said.

The president’s threat that the new tariff could rise “well beyond 25 per cent” in future added to fears for the world economy, which is already showing signs of a marked slowdown.

Trade relations between China and the US appeared to have thawed after talks at the G20 summit in Osaka in June but Mr Trump returned to his aggressive stance in a volley of tweets this week.

He accused China of reneging on its pledge to purchase more US agricultural products and to halt Chinese sales of the deadly opioid fentanyl into America.

Mr Trump tweeted: “The US will start, on 1 September, putting a small additional tariff of 10 per cent on the remaining $300bn of goods and products coming from China into our country. This does not include the $250bn already tariffed at 25 per cent.”

Speculation also gathered among some market watchers that the new tariffs were aimed at indirectly boosting the domestic US economy ahead of the presidential election, rather than hurting China.

Mr Trump reacted angrily to the US central bank’s comments this week that it will not be implementing a series of rate cuts this year.

The president has made no secret of the fact he wants low rates because cheap money will help to turbo-charge US economic growth, at least in the short term.

“When the Fed lowered interest rates for the first time in 10 years on Wednesday, it specifically cited trade uncertainty as a reason,” said Mark Matthews, head of Asia research at Julius Baer.

“Logically, therefore, more tariffs should mean more rate cuts.

“Trump may be thinking that, with exports only 12 per cent of [US] GDP and substitutes to China emerging at home and abroad, the risk of tariffs is outweighed by the reward of further rate cuts.”

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