Trump tariff move escalates China trade war

US President Trump has ramped up the trade dispute with China by more than doubling tariffs on $200bn of Chinese imports before the final day of talks between the countries.

Trump went ahead with his threat to increase tariffs from 10% to 25% on a broad range of Chinese goods. China’s commerce ministry said it "deeply regretted" the decision and that it would "take necessary countermeasures".

Liu He, China’s vice-premier, and Robert Lighthizer, the US trade representative, will meet in Washington for the last day of negotiations on Friday. China held out the prospect of an 11th-hour deal, saying: "It is hoped the US and Chinese sides will meet each other halfway."

The standoff between the world’s two biggest economies has unnerved markets because of the potential consequences for the global economy.

Gregory Daco, chief US economist at Oxford Economics, said Trump’s decision to increase tariffs on half of US imports from China would reduce US GDP by 0.3% and China’s by 0.8%. Tariffs on all US-China trade would reduce global GDP by 0.5%.

"No one wins trade wars, not even the bystanders," Daco said. “Since"tariff reversals take years to unwind especially in a slow growth environment, and considering the Trump administration’s intent to maintain those tariffs already imposed, if the bilateral tensions spiral into a full-blown global trade war we would expect this to trigger a global recession."

Trump followed through on his threat to increase tariffs after negotiations appeared to stall. The president had said he received a "beautiful letter" from China’s president Xi Jinping that urged the countries to work together to settle the dispute.

Neil Wilson, chief markets analyst at Markets.com, said: "Talks between the Chinese and the Americans are continuing today, although we don’t hold out much hope of anything meaningful being achieved this week.

"It all tends to suggest Mr Trump is playing one of his aces in order to force the Chinese into concessions. His bet is that the US economy can weather any hit from tariffs better than China. He is probably right but this will not help ease uncertainty about the global economy."