Continue Reading Below
In a series of tweets, Trump accused Beijing of stealing “vast amounts of wealth from the U.S.,” and ordered American companies to find alternatives to doing business with China. U.S. equity markets sold off sharply.
“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA,” Trump tweeted on Friday. “I will be responding to China’s Tariffs this afternoon.”
Friday morning, Beijing said it would slap tariffs of 5 or 10 percent on $75 billion of U.S. goods, set go to into effect on Sept. 1 and Dec. 15. China also announced it would reinstate a 25 percent tariff on U.S. cars and a 5 percent tariff on auto parts.
The tariffs were a response to Trump’s announcement earlier this month that new taxes would hit Chinese goods. Trump on Aug. 1 said the U.S., beginning next month, would place a 10 percent tariff on $300 billion worth of Chinese goods, adding they could go "well beyond 25 percent" if necessary.
Beijing responded by letting its currency, the yuan, weaken below seven per dollar for the first time in over a decade. The Trump administration then delayed the tariffs on about 60 percent of those goods until Dec. 15.
A further escalation of the trade war could zap investor confidence and roil markets, which have already been grappling with a slowing U.S. economy.
The U.S. economy grew at a 2.1 percent annualized rate in the second quarter, down from 3.1 percent the prior quarter. Last week, the spread between the U.S. 2-year and 10-year yields turned negative for the first time in over a decade. Such an event that has preceded every U.S. recession of the past 50 years.
“The risk here for China when it does things like this is simply to galvanize support even more the president,” Office of Trade and Manufacturing Director Peter Navarro told FOX Business’ “Maria in the Mornings” on Friday, adding that "we are all China hawks now."