China and the US ratchet up trade war in a day of retaliation

Tariffs to start Sept. 1

By Yong Xiong and Victoria Cavaliere, CNN Business
VCG/VCG via Getty Images

(CNN) - The US-China trade war ratcheted up yet again on Friday, with Beijing unveiling a new round of retaliatory tariffs on about $75 billion worth of US goods.

China will place additional tariffs of 5% or 10% on US imports starting on September 1st, according to a statement posted by China's Finance Ministry.

The Ministry also announced plans to resume tariffs on US imports of automobiles and automobile parts. The tariffs would be 25% for vehicles or 5% on parts, and would take effect on December 15th. The new tariffs will target 5,078 products, including soybeans, coffee, whiskey, seafood and crude oil.

Last week, China said it would take countermeasures after the United States announced it would impose 10% tariffs on Chinese imports worth $300 billion.

The United States postponed the implementation of about half of those tariffs, which will cover several categories of Chinese-made consumer goods, until December. They had been due to take effect in September.

US President Donald Trump responded swiftly, saying Friday afternoon he was increasing rates on existing tariffs on Chinese goods.

The $250 billion of goods and products from China currently being taxed at 25% will be taxed at 30%, Trump said on Twitter. The remaining $300 billion of goods and products that was to be taxed at 10% will now be taxed at 15%, Trump wrote.

Trump earlier in day said US companies should move operations from China in response to their tit-for-tat tariffs.

"We don't need China and, frankly, would be far better off without them," Trump wrote on Twitter. He also "ordered" American companies "to immediately start looking for an alternative to China."

The National Retail Federation issued a statement calling the demand "unrealistic."

"For years, retailers have been diversifying their supply chains, but finding alternative sources is a costly and lengthy process that can take years. It is unrealistic for American retailers to move out of the world's second largest economy," the group said. "Our presence in China allows us to reach Chinese customers and develop overseas markets. This, in turn, allows us to grow and expand opportunities for American workers, businesses and consumers."

The American Farm Bureau Federation said the tariff announcement "signals more trouble for American agriculture."

"We know continued retaliation only adds to the difficulties farm and ranch families are facing and takes the situation in the exact wrong direction," the statement said.

US markets, which had struggled for direction earlier in the day, dropped on Trump's comments. The Dow closed down about 600 points.

The US Trade Representative's office did not immediately comment on China's tariffs announcement.

The move comes amid indications the ongoing trade war is having an impact on the world's two largest economies. Industrial production in China — an important indicator for the country's economy — grew just 4.8% in July compared to a year earlier, according to China's National Bureau of Statistics. That's the worst growth for that sector in 17 years.

American factories are also contracting for the first time in a decade and red lights are flashing in the bond market, where the yield curve has inverted. Such inversions, where the 10-year Treasury yield dips below the two-year Treasury rate, are historic predictors of a coming recession.

Consumer spending, which has remained a bright spot of the American economy, could be hurt by higher prices from the pending tariffs on goods like phones, video games and athletic shoes, analysts have warned.

The US Chamber of Commerce, which represents the interests of more than three million businesses, called on China and the United States to "get back to the table" to discuss issues important to both sides, including intellectual property and market access.

"Today's Chinese retaliation is unfortunate, but not unexpected. The fact of the matter is that nobody wins a trade war, and the continued tit-for-tat escalation between the U.S. and China is putting significant strain on the U.S. economy, raising costs, undermining investment, and roiling markets," the statement said.

--CNN Business' Matt Egan contributed to this report

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