China retaliates with $60 billion worth of counter-tariffs

China announced Monday that it will impose an additional $60 billion in tariffs on American imports starting June, following the Trump administration’s decision to increase tariffs on Chinese goods last week.

At least 5,000 American-made goods are subject to the hike. Most will face a tariff of 25%, up from 10% when the tariffs were first imposed last September.

The markets responded on opening Monday, with the Dow falling by more than 600 points and significant selloffs in the works, increasing the potential for market volatility.

All of this threatens one of the key self-proclaimed achievements of the president: A prolonged U.S. stock market rally (even though, as experts have pointed out, the president was riding the “tailwind” of an already strong market when he came into office).

Trying to get ahead of the selloff, President Donald Trump jumped on Twitter to respond, accusing China of backing out of a “great deal,” while imploring the country to stand down rather than respond to his tariffs with a measure of its own:

..There will be nobody left in China to do business with. Very bad for China, very good for USA! But China has taken so advantage of the U.S. for so many years, that they are way ahead (Our Presidents did not do the job). Therefore, China should not retaliate-will only get worse!

— Donald J. Trump (@realDonaldTrump) May 13, 2019

The current round of tariffs have largely been absorbed by U.S. importers. But this next set of tariffs, experts say, will hit a very wider set of products, including clothing and electronics, and those will likely be passed on to the consumer.

Despite what Trump says, the new $60 billion “is a proportionate response to the latest American tariffs,” said Scott Kennedy, senior adviser and Freeman Chair in China Studies and director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies.

Answering questions via email from Beijing, Kennedy told ThinkProgress that he hasn’t heard of American companies there facing any new problems, which “suggests China still wants to engage in negotiations with the U.S.”

But, he said, this does not mean that China is ready to roll over, nor that, “it is ready to make greater compromises and that a deal is likely, but it is less worrisome than had China retaliated with greater penalties.”

So, at this point, China, which Kennedy said has failed to live up to commitments it made when it joined the World Trade Organization in 2001, isn’t escalating so much as it is trying to match the United States, punch-for-punch.

Tariffs will hit already ‘suffering’ Americans

These are merely the latest developments in negotiations that are yawning into their 11th month as Trump tries to tackle the trade deficit between the United States and China. He slapped tariffs on Chinese goods last summer, and China fired back, causing pain to the American agricultural sector and manufacturers.

Kennedy said the new tariffs will “mainly affect those who are already suffering, including farmers, automakers, and producers of intermediate goods.”

Small business owners and farmers have been responding to the tariff tiff on Twitter:

Happy Mother’s Day! Sadly, I’m spending mine worrying about how to pay this extra 25% tariffs on top of 17.6% for goods ordered just 2 days before this ridiculous and insane increase. My small business is sinking and I don’t see a life jacket! @TariffsHurt @stevewonk @JonGoldDC

— MinkeeBlue (@MinkeeBlue) May 12, 2019

Soy Growers are fed up with tariffs and want trade reopened. Read more from ASA: https://t.co/RDK8mgxRdk #TradeNotTariffs #RescindTheTariffs #Soybeans pic.twitter.com/XW8MnIQNVm

— American Soybean (@ASA_Soybeans) May 13, 2019

The president still insists that the tariffs will primarily hurt China, but that claim was directly contradicted by his economic advisor, Larry Kudlow, who admitted on Fox New Sunday that yes, Americans are paying for these tariffs.

Little is known about actual negotiations.

If you were listening to the signals coming from the Trump administration for the past few months, it seemed that the talks were progressing, with a final deal anticipated by April.

But then, there were reports last week out of Reuters and Bloomberg that the Chinese were “backtracking” on commitments they had made in earlier drafts of the agreement, notably on the issues of forced transfer of foreign technology (a practice the Chinese deny) and better U.S. access to Chinese markets. The talks ended without a deal on Friday.

Chinese Vice Premier Liu He, Beijing’s lead negotiator, called this latest round of tariffs and counter-tariffs “a small setback” in the trade talks.

“China believes tariffs are the starting point of the bilateral trade disputes. If a deal is to be reached, the tariffs should all be eliminated. This is the first point,” said Lui on Saturday.

But Trump has already said that he would not be removing tariffs on China, even after a deal is struck.

Given the opacity of these talks, it’s hard to know what’s really going on, as Chad Bown, Reginald Jones Senior Fellow at the Peterson Institute for International Economics, said in a Monday morning podcast.

“We don’t actually know that they were ever really close to a deal… that there was any reneging on the Chinese side, or if it was just communication,” said Bown.

As ThinkProgress reported last week, this might be a function of misunderstanding between Chinese and American negotiators. China has been passing laws and regulations in recent months that it says address many of the issues included in earlier drafts of the deal. A new foreign investment law, for instance, is intended to take away some of the advantages given to domestic businesses, putting foreign investors on equal footing with their Chinese counterparts or competitors.

As it stands, the deal — from what we know — does not tackle China’s currency manipulation, which, some experts say, is what really needs to be addressed in order to address trade issues.

Elizabeth Chien-Hale, an attorney specializing in international intellectual property protection, told ThinkProgress that this is a lot about “public posturing, on both sides, for political purposes.”

At this point, she said, China’s new foreign investment law is “starting to sound more like a declaration,” with authorities possibly waiting to see how the trade talks end before they decide on how to implement them.

Trump certainly needs the win to put wind in the sails of his 2020 campaign, while China’s Communist Party wants the public to believe that it is standing strong against the United States and “not making too many concessions.”

Chien-Hale believes the negotiators from both the U.S. and China are looking for “stepping stones down” from this escalation “without losing face.”

She also said the last round of trade talks in Washington, D.C., were being compared in Chinese media to a banquet where the guests expected to be slaughtered.

“So there’s been analogies between that meeting in D.C. to that dinner party. But they’re saying, ‘But that’s OK. We came with our sword,'” said Chien-Hale.