President Donald Trump said on Monday he would meet with Chinese President Xi Jinping next month and that he expected their discussions would be “very fruitful,” as the trade war between the world’s two largest economies intensified.
Earlier, China announced it would impose higher tariffs on a range of U.S. goods including frozen vegetables and liquefied natural gas, a move that followed Washington’s decision last week to hike its own levies on $200 billion in Chinese imports.
Trump had warned Beijing not to retaliate.
The U.S. president said he would meet Xi at a G20 summit in Japan in late June.
“We’re dealing with them. We have a very good relationship,” Trump said in remarks at the White House. “Maybe something will happen. We’re going to be meeting, as you know, at the G20 in Japan and that’ll be, I think, probably a very fruitful meeting.”
Trump, who has embraced protectionism as part of an “America First” agenda, added that he had not yet decided whether to go ahead with tariffs on roughly another $325 billion in goods from China.
For its part, China said on Monday it plans to set import tariffs ranging from 5% to 25% on 5,140 U.S. products on a revised $60 billion target list. It said the tariffs will take effect on June 1.
“China’s adjustment on additional tariffs is a response to U.S. unilateralism and protectionism,” its finance ministry said. “China hopes the U.S. will get back to the right track of bilateral trade and economic consultations and meet with China halfway.”
The prospect that the United States and China were spiraling into a no-holds-barred dispute that could derail the global economy has rattled investors and led to a sharp selloff on equities markets in the past week.
Global equities tumbled again on Monday, with major Wall Street stock indexes down more than 2.0%. China’s yuan currency fell to its lowest level since December and oil futures slumped.
“It’s clear that there is a lot of nervousness around the U.S.-China trade negotiations and concern that it’s really deteriorating pretty significantly, and that’s impacting all areas of markets,” said Kristina Hooper, chief global market strategist at Invesco in New York.
Trump stepped up his verbal attacks on China on Friday after two days of high-level trade negotiations in Washington ended with the two sides in an apparent stalemate.
U.S. Treasury Secretary Steven Mnuchin told CNBC the talks were ongoing and he was working on when to travel to Beijing.
STEADY DRUM BEAT
Trump has accused China of reneging on commitments it made during months of trade negotiations, which Beijing has denied.
China tried to delete commitments from a draft agreement that its laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers. That dealt a major setback to the talks.
In the middle of the negotiations last week, Trump hiked tariffs on Chinese goods to 25% from 10%. The move affected 5,700 categories of Chinese products including internet modems, routers and similar devices.
Beijing said on Monday it would “never surrender” to external pressure, and its state media kept up a steady drum beat of strongly-worded commentary, reiterating that the door to talks was always open, but vowing that China would defend its national interests and dignity.
In a commentary, state media said the effect of the U.S. tariffs on the Chinese economy was “totally controllable.”
On Monday, China also said U.S. policies are threatening the existence of the World Trade Organization, setting out a string of grievances in a WTO “reform proposal” published by the organization on its website.
Trump has said he is in “no rush” to finalize a deal with China. He again defended the move to hike U.S. tariffs and said there was no reason why American consumers would pay the costs.
Economists and industry consultants, however, maintain that it is U.S. businesses that will pay the costs and likely pass them on to consumers. Consumer spending accounts for more than two-thirds of U.S. economic activity.
U.S. tariffs last year triggered retaliation by China, which imposed 25 percent levies on $50 billion worth of U.S. products including soybeans and beef, and lower tariffs on a list of $60 billion in goods.
In a research note, Goldman Sachs economists said new evidence showed the costs of Washington’s tariffs on China last year had fallen entirely on U.S. businesses and households, with no clear reduction in prices charged by Chinese exporters.
They added that the effects of the tariffs had spilled over noticeably to the prices charged by U.S. producers competing with goods affected by the levies.
The United States has rolled out aid for U.S. farmers hurt by Chinese tariffs during the 10-month trade war. Trump said on Monday his administration was planning to provide about $15 billion to help farmers whose products might be targeted.
Farmers, who are a core political constituency for Trump’s Republicans heading into the 2020 presidential and congressional elections, are growing increasingly frustrated with the protracted trade talks and the failure to reach an agreement.
“What that means for soybean growers is that we’re losing. Losing a valuable market, losing stable pricing, losing an opportunity to support our families and our communities,” Davie Stephens, president of the American Soybean Association, said in a statement.
U.S. soybean futures fell to their lowest in a decade on Monday.