President Donald Trump intensified pressure Thursday on China to reach a trade deal by saying he will impose 10% tariffs Sept. 1 on the remaining $300 billion in Chinese imports he hasn't already taxed.
The president has already imposed 25% tariffs on $250 billion in Chinese products, and Beijing has retaliated by hitting $110 billion in U.S. goods with tariffs.
U.S. consumers are likely to feel the pain if Trump proceeds with the new tariffs. His earlier tariffs had been designed to minimize the impact on ordinary Americans by focusing on industrial goods. The new tariffs will hit a vast range of consumer products from cellphones to silk scarves.
“Protection is never gonna be good for any part of the U.S.,” said Douglas Nelson, an economics professor at the Murphy Institute at Tulane University. “The rice farmers, the sugar cane farmers, the ports, they will all be hurt,” he said of Louisiana.
Economist Loren Scott said the new tariffs could lengthen the construction lull going on at Louisiana petrochemical and liquefied natural gas plants. "There are multibillion-dollar projects that have been announced that haven't started construction yet," he said. "By their very nature, they use a lot of Chinese steel."
In Louisiana, more than 156,000 jobs are supported by international trade, according to U.S. Census data. Roughly 34,900 jobs are expected to be lost stemming from the trade war, says Tariffs Hurt the Heartland, a nonpartisan organization in Washington D.C. that has been crunching federal import and export data by state.
The group estimates that Louisiana businesses have paid $178 million more as a result of import taxes as of May. Likewise, the organization projects Louisiana companies have paid $105 million in retaliatory tariffs on exports during the same time frame.
The volume of Chinese imports to Louisiana has dropped slightly between 2017 and 2018 from $1.37 billion to $1.36 billion, the largest import item being chemicals used to feed the growth of petrochemical industry plants in the state, according to the Foreign Trade Division and U.S. Census Bureau.
The bigger impact is on exports. China used to rank as one of the top trading partners with Louisiana, with more than $7 billion in exports during 2017. But in 2018, the state sent just over $3 billion in exports to China, said Ed Webb, chief executive officer of the World Trade Center New Orleans.
China now ranks outside of the top 5 trading partners for the state, Webb said, falling behind countries such as Mexico, South Korea, Brazil, Canada and the Netherlands. “Businesses that were trading with China are holding back, because they don’t know when the waters are going to calm down,” he said.
Since 2012, there have been $187.9 billion in industrial construction projects announced in Louisiana. Scott said work has not started on $114.9 billion in projects, such as Wanhua Chemical’s $1.25 billion plant in St. James Parish.
“Wanhua was already getting a little dicey because of earlier tariffs,” he said. “My guess is this will make it more problematic.”
The trade war is having a direct impact on the Port of New Orleans. The New Orleans port previously said its volume of imported steel fell 25% last year due to tariffs, while it reported an overall decline in its bulk cargo of 23%.
Also, the port approved a $28.5 million contract in March to buy and install two 100-foot-tall gantry cranes from China. The cranes would be used to move shipping containers off vessels onto the docks at its Napoleon Avenue container terminal. The port said the cranes are needed to better serve the larger container ships that call on it. But the 25% tariffs will put an undue strain on the budget and threaten port jobs. Officials are asking the Trump administration not to apply the tariff on the cranes, which haven't been made in the U.S. in more than two decades.
China is unlikely to knuckle under Trump’s tariffs tactics, Nelson, the Tulane economist, said. It’s a big country that holds an enormous amount of U.S. debt and produces the rare earth metals that American tech companies need and can’t get anywhere else, he said. “This is a dumb policy that’s still dumb and doubling down on it is not going to make it any better.”
The president's announcement via Twitter came as a surprise, in part because the White House on Wednesday had said Beijing confirmed that it planned to increase its purchases of American farm products. That word came just as U.S. and Chinese negotiators were ending a 12th round of trade talks in Shanghai, which the White House called "constructive."
Though the negotiations ended without any sign of a deal, they are scheduled to resume next month in Washington.
The Dow Jones Industrial Average, which had been up nearly 300 points earlier in the day, was down nearly 200 points after Trump's tweets announcing the new tariffs.
Trump has long said he was preparing to tax the $300 billion in additional Chinese tariffs. But he had suspended the threat after meeting with President Xi Jinping in Osaka, Japan, in June.
It isn't clear when American consumers are likely to feel the impact of the additional tariffs, but higher prices could show up in stores this fall.
"Attention all Target & Wal-Mart shoppers … the price on the goods you buy ahead of the holidays are going up due to trade policy," tweeted Joseph Brusuelas, chief economist at the consultancy RSM.
Besides announcing the additional tariffs on Chinese imports, Trump tweeted that "we look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!"
Trump accused Beijing of failing to follow through on stopping the sale of fentanyl to the United States or on purchasing large quantities of farm goods such as soybeans.
The world's two biggest economies are locked in a trade war over U.S. allegations that Beijing uses predatory tactics — including stealing trade secrets and forcing foreign companies to hand over technology — in a drive to overtake American technological dominance.
Talks had broken down in May after the United States accused the Chinese of reneging on earlier commitments.
"The fact that this tweet comes after only one meeting with the Chinese delegation following the resumption of talks is extremely concerning," said Rick Helfenbein, president of the American Apparel & Footwear Association.
Wendy Cutler, a former U.S. trade negotiator who is now vice president at the Asia Society Policy Institute, said: "These talks are not getting any easier. I don't expect the Chinese to sit by …. The combination of these latest tariffs, with Chinese counter-retaliation, is going to take a heavy toll on U.S. consumers, workers, farmers and businesses."
Trump's trade war and its consequences were a key factor in the Federal Reserve's decision Wednesday to cut interest rates in an otherwise healthy U.S. economy. During a news conference, Chairman Jerome Powell pointed repeatedly to the uncertainty caused by Trump's pursuit of trade wars on multiple fronts as a reason for the rate cut.
The president's decision to impose a 10% tax on an additional $300 billion of Chinese imports might have been predicated, in fact, on his confidence that Powell's Fed stands ready to cut rates again. The bond market signaled its belief in that theory Thursday, with Treasury yields dropping sharply after Trump's announcement.
And according to the CME Group, market traders now foresee a roughly 70% likelihood of another rate cut when the Fed next meets in September. Before Trump's announcement, the likelihood was pegged at under 50%.
Sarah Bloom Raskin, a former Fed board member, has warned that Fed rate cuts could embolden Trump to escalate trade battles for that very reason.
In the meantime, the additional Trump tariffs risk further souring the relationship between the world's two largest economies.
"The stage is now set for a further escalation of trade tensions between China and the U.S.," said Eswar Prasad, a Cornell University economist and former head of the China division at the International Monetary Fund. "It has become clear that there is no clear path to a resolution of the trade dispute in the coming months, and China might choose to live with a trade war while waiting out the Trump presidency."
Trump has insisted that the tariff war is hurting China but not the United States. He tweeted two days ago: "Trumps got China back on its heels, and the United States is doing great."
But his administration is providing $16 billion in aid to American farmers — on top of $11 billion last year — to offset sales lost after China imposed retaliatory tariffs on soybeans and other U.S. farm products.