Following the end of bilateral trade talks between the US and China in Shanghai on Tuesday and Wednesday, President Trump surprised many with his tweet that as of 1 September the US would impose a 10 percent tariff on the remaining $300 billion of Chinese goods and products being imported into the United States.
It was also implied that these levies were not the end but could be increased over time to as much as 25 percent, like the earlier tariffs imposed on Chinese imports worth $250 billion. As in the past, China is expected to reciprocate with their own set of taxes as they have done in the past whenever the US imposed duties.
This came right after Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer reported to the president at the White House on the stalled trade negotiations while both countries had announced that even though no agreement had been reached, the discussions had been constructive and would be continued in Washington in September.
The reason for the US President’s move following the temporary trade war truce agreed upon in June with President Xi Jinping at the G-20 meeting in Osaka, Japan he said is because China has yet to make major purchases of American agricultural products nor stemmed the production and sale of the synthetic opioid fentanyl in the US. However, according to CNBC, Chinese authorities have said that as of 19 July they had made significant orders for soybeans, cotton, pork and sorghum.
BBC reported that the US Chamber of Commerce, which comprises more than 3 million companies, felt the president’s move was anything but good for business, and as soon as the president’s tweets were read, the Dow Jones Industrial Average dropped 304 points from the 311 points, or 1 percent rise it had achieved earlier on Thursday.
This stock market volatility had begun the day before after Jerome Powell, the chairman of the US Federal Reserve, announced the first cut in interest rates since 2008, setting the benchmark a quarter percent lower to a range of 2 to 2.25 percent, which Trump complained was not enough.
While the previous cuts over a decade ago were to stimulate the faltering US economy, Powell said this action was done as a preventative measure. The Fed just wants to make it easier for companies to borrow even while the US economy continues to grow, unemployment is at a 50-year low and wages appear to be on the rise. Still, the market did not take the news well, with the Dow falling 266 points and the S&P dropping by 1.1 percent.
This is happening even after the US Congress approved a $1.37 trillion budget for the coming fiscal year, commencing 1 October, which alleviates concerns about a government shutdown similar to what happened last year when the President did not get the funding for his wall on the US southern border.
Trump’s actions might have also been a political move as his moves seem to overshadow the US Democratic party’s two days of debates between their presidential candidates during which they attacked the president as well as their fellow contenders.