President Trump ordered his administration to consider imposing tariffs on an additional $100 billion in Chinese imports, a salvo that sent U.S. stock futures tumbling on concern that the world's two largest economies were hurtling toward a full-blown trade war.
The move threatens to unravel efforts by top U.S. and Chinese trade officials to lower the heat and reach an agreement that could stave off an escalating conflict.
U.S. stock futures dropped on Trump's latest trade directive. Standard & Poor's 500 index futures slid as much as 1.6%, after the underlying gauge ended the trading day Thursday with a gain of 0.7%.
"In light of China's unfair retaliation, I have instructed the USTR [United States trade representative] to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs," Trump said in a statement issued by the White House.
A White House official later said the $100-billion figure Trump used in the statement referred to the value of the imports that would be covered by the additional tariffs, not the total amount of tax that would be charged on the products.
China's state news agency said Friday that Beijing vowed to defend its interests "against new U.S. actions."
On Wednesday, China said it would levy a 25% tariff on about $50 billion worth of U.S. imports including soybeans, automobiles, chemicals and aircraft. That was in response to the release by the U.S. of a list of proposed tariffs the day before, covering $50 billion in Chinese goods.
The trade conflict stretches back to March 8, when the Trump administration announced global tariffs on steel and aluminum to protect U.S. producers, eventually exempting many nations but not China. Beijing shot back by levying 15%-to-25% tariffs on $3 billion worth of American goods, including scrap aluminum, frozen pork, dried fruits, nuts and wine.
U.S. Trade Representative Robert Lighthizer quickly followed up Trump's Thursday evening declaration with a statement of his own stressing that none of the tariffs would take immediate effect. He said that any additional tariffs first would be subject to a 60-day public comment period, as would the penalties announced earlier in the week.
"No tariffs will go into effect until the respective process is complete," Lighthizer said.
Trump chief economic advisor Larry Kudlow and other administration officials have spent the last two days trying to tamp down trade-war fears.
"I think we're going to come to agreements," Kudlow said Wednesday on Fox News. "I believe that the Chinese will back down and will play ball."
Yet Trump signaled a harder line in a speech earlier Thursday, saying it is time to stop China from "taking advantage" of America.
"You have to go after the people who aren't treating you right," Trump said in West Virginia. "We're going to have a fantastic relationship long term with China, but we have to get this straightened out, we have to have some balance."
Kudlow, Trump's newly installed economic advisor, has spent days trying to calm investors who are concerned the spat will spark a trade war, saying on Thursday the administration was involved in "delicate negotiations" that might forestall the need for tariffs. He said the U.S. could still hammer out a deal with Beijing, in part by convincing other major economies to call out the Asian nation for unfair trading practices.
But there is no quick or cosmetic solution to the deep-seated grievances at the heart of dispute. Trump wants fundamental changes from Beijing — to reduce its fat trade surplus with the U.S., to open up Chinese markets and to alter policies and behavior that officials say have hurt American intellectual property and innovation.
David Loevinger, a former senior Treasury official who is now managing director of emerging markets at TCW Group Inc., said the move casts doubt on the direction of U.S. policy.
"It's just not clear what the connection is right now between what the president says and what will actually become policy," Loevinger said. "Markets increasingly have to discount White House statements on trade issues."
Next month, U.S. Treasury Secretary Steven Mnuchin is expected to propose a plan to clamp down on Chinese investments in the U.S., a move that will almost certainly be met with retaliation from Beijing in the form of tougher regulations for American firms in China.
China countered Trump's plan, announced Tuesday, to slap tariffs on 1,333 of China's products — such as semiconductors and lithium batteries — by saying Wednesday that it would impose duties on a variety of agriculture products, including soybeans, the second-most-valuable U.S. crop.
The U.S. shipped $14.6 billion of soybeans to China, its biggest buyer, in the last marketing year — more than a third of the entire U.S. soybean crop. Agriculture is one of the few sectors of the American economy that run a trade surplus.
Such a tariff would hit U.S. farmers hard at a time they are already dealing with depressed crop prices and stagnant values for their land.
Trump said in his statement that he's directing Agriculture Secretary Sonny Perdue to use his authority to put a plan in place to protect agricultural interests.
Concern about a potential trade war already had been rippling through farm states, which are a crucial part of Trump's political base and a powerful voting bloc. Trump won eight of the 10 states that are the biggest producers of soybeans.
Farm state Republicans, including Iowa Sens. Joni Ernst and Charles E. Grassley, and agriculture groups had urged Trump to reconsider his actions on trade.
"There is a real danger that increased tariffs on U.S. exports will harm Iowa producers and undermine the rural economy," Ernst said in a statement Wednesday.
Another Republican senator, Ben Sasse of Nebraska, blasted Trump's announcement late Thursday. "If he's even half-serious, this is nuts," Sasse said in a statement. "The president has no actual plan to win right now. He's threatening to light American agriculture on fire. Let's absolutely take on Chinese bad behavior, but … this is the dumbest possible way."
Perdue said at an event Wednesday in Ohio that Trump had assured him that the administration would "take care of our American farmers," possibly foreshadowing Thursday's announcement.
"He said, 'Sonny, you can assure your farmers out there that we're not going to allow them to be the casualties if this trade dispute escalates,' " Perdue told reporters, according to a copy of his remarks distributed by the Agriculture Department.
Times staff writer Don Lee contributed to this report.
7:12 p.m.: This article was updated with comments from China's state news agency and Sen. Ben Sasse.
5:35 p.m.: This article was updated with White House clarification on Trump's $100-billion figure and with more background on the trade conflict, including comments from Sen. Joni Ernst and Agriculture Secretary Sonny Perdue.