U.S. President Donald Trump called trade talks between China and the United States "very congenial" despite new tariffs the U.S. imposed Friday on $200 billion US in Chinese imports.
Trade Secretary Steve Mnuchin said talks in Washington — aimed at ending a dispute that has disrupted billions of dollars in trade and shaken global financial markets — had concluded for the day and described them as constructive. China's top trade negotiator Liu He left the U.S. Trade Representative's office on Friday morning, according to Reuters.
Trump tweeted Friday that the increased tariffs will bring "FAR MORE wealth" to the U.S., although a study by the Federal Reserve Bank of New York, and Columbia and Princeton universities says the burden of tariffs falls on U.S. consumers and businesses that buy imports.
Some lawmakers have recently expressed concern about the effect of the tariffs on farmers.Trump suggested on Twitter Friday that money from the additional tariffs would allow the U.S. to buy more agricultural goods from U.S. farmers and ship it to "poor & starving" countries.
The Trump administration raised duties from 10 per cent to 25 per cent, while China's Commerce Ministry said it would take "necessary countermeasures" but gave no details.
U.S. markets slumped Friday after Trump tweeted there is "absolutely no rush" on trade talks with China. The Dow gave up 100 points in minutes, and the S&P 500 and Nasdaq tracked those declines hours before the opening bell.
Markets have regained some losses, but all three indexes remain in the red.
China accused of reneging on commitments
The talks in Washington were thrown into disarray this week after top U.S. trade negotiator Robert Lighthizer and Treasury Secretary Steven Mnuchin accused the Chinese of reneging on commitments they'd made earlier.
"China should not renegotiate deals with the U.S. at the last minute," Trump tweeted. "There is no need to rush" through negotiations because "'massive payments' [from China] go directly to the Treasury of the U.S."
Actually, the burden of tariffs falls on U.S. consumers and businesses that buy imports. By the end of last year, those consumers and companies were paying $3 billion a month in higher taxes and absorbing $1.4 billion a month in lost efficiency, according to a study by the Federal Reserve Bank of New York, and Columbia and Princeton universities.
Money is indeed going into the federal treasury, but it's mostly, if not entirely, coming from the tariffs on U.S. businesses and consumers, not China, and it's not a driver of economic growth, but rather a risk to it.
Some lawmakers recently expressed concern about the effect of the tariffs on farmers thatTrump referenced in his tweets.
He suggested that money from the additional tariffs would allow the U.S. to buy more agricultural goods from American farmers, and ship the produce to "poor & starving" countries.
Trump tweeted that if the U.S. bought $15 billion US in agriculture from farmers, it would be far more than China buys now. He also said the U.S. would have more than $85 billion US left over for new American infrastructure, health care or other programs.
It was unclear what numbers Trump was using to make his point. According to the United States Department of Agriculture, China bought $9.2 billion in American agricultural exports in 2018.
'We should not hurt innocent people'
Shares in Asia were mixed Friday amid renewed investor jitters about the possible impact of the trade battle on global economic growth.
Beijing retaliated for previous tariff hikes by raising duties on $110 billion US of American imports. But regulators are running out of U.S. goods for penalties due to the lopsided trade balance.
Chinese officials have targeted operations of American companies in China by slowing customs clearance for their goods and stepping up regulatory scrutiny that can hamper operations.
Chinese Vice-Premier Liu He waves as he leaves the Office of the United States Trade Representative after tariff negotiations in Washington on Thursday. (Andrew Caballero-Reynolds/AFP/Getty Images)
The higher U.S. import taxes don't apply to Chinese goods shipped before Friday. By sea, shipments across the Pacific take about three weeks, which gives negotiators a few more days to reach a settlement before importers may have to pay the increased charges.
Liu, speaking to Chinese state TV on his arrival in Washington, said he "came with sincerity." He appealed to Washington to avoid more tariff hikes, saying they are "not a solution" and would harm the world.
"We should not hurt innocent people," Liu told CCTV.
A sticking point is U.S. insistence on an enforcement mechanism with penalties to ensure Beijing lives up to its commitments. American officials say China has repeatedly broken past promises.
China wants tariffs lifted as soon as an agreement is reached, while U.S. officials want to keep them as leverage to ensure compliance.
Canadian Prime Minister Justin Trudeau urged Trump in a phone call to press China to release two Canadians who have been held for five months.
The men were detained in apparent retaliation after Canada arrested an executive of Chinese tech giant Huawei on U.S. charges of bank fraud.