Apparently impatient and believing that the Chinese were playing a delay game on coming to agreement on a new trade deal, President Trump abruptly signaled a switch to hardball threats. The president issued two linked tweets Sunday, threatening to increase tariffs Friday to 25% on $200 billion of Chinese experts currently taxed at 10%, and to apply a 25% tariff on $325 billion in Chinese exports currently not subject to tariffs “soon.”
For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars….
….of additional goods sent to us by China remain untaxed, but will be shortly, at a rate of 25%. The Tariffs paid to the USA have had little impact on product cost, mostly borne by China. The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!
— Donald J. Trump (@realDonaldTrump) May 5, 2019
Stock futures in the United States and around the world immediately plunged:
US stock futures trading
But as Trump well understands, China is far more vulnerable than the US to a downturn in trade. As the Wall Street Journal noted:
U.S. futures pointed to opening losses of 1.9% and 1.8% for the Dow Jones Industrial Average and S&P 500, respectively.
The Shanghai Composite Index fell 5.6%, while its counterpart in Shenzhen tumbled 7.4%, both registering their biggest single-day declines since 2016.
According to Bloomberg, China is suppressing news of the threats, no doubt hoping to limit the stock market reaction there: