BEIJING — Deepening its trade battle with the U.S. and sending financial markets spinning, China announced tariff hikes Monday on $60 billion of American goods in retaliation for President Donald Trump's latest penalties on Chinese products.
Punitive charges of 5% to 25% on thousands of American products including batteries, spinach and coffee will take effect June 1, the Finance Ministry said. That extends Chinese duty increases to $110 billion of imports from the United States.
The announcement followed an increase of U.S. duties on $200 billion of Chinese imports to 25% from 10% in the increasingly bitter dispute. American officials have accused China of backtracking on commitments they say it made in earlier negotiations.
On Twitter, Trump warned Chinese President Xi Jinping his country "will be hurt very badly" if it doesn't agree to a trade deal.
Trump tweeted China "had a great deal, almost completed, & you backed out!"
The president insisted increases on Chinese goods don't hurt American consumers, saying there is "no reason for the U.S. Consumer to pay the Tariffs."
White House economic adviser Larry Kudlow acknowledged Sunday that U.S. consumers and businesses do pay the tariffs. "Both sides will pay," he told Fox News.
China had vowed "necessary countermeasures" on Friday against Trump's escalation.
Frazzled by the uncertainty, shares sank Monday across the globe. The Dow Jones Industrial Average lost 622.10 points or 2.4%, while the Standard & Poor's 500 sank 2.5% in early trading.
China's announcement Monday said tariff increases are going ahead based on a list of $60 billion of U.S. goods Beijing released in August. That list was issued in response to Trump's threat to raise tariffs on $200 billion of Chinese goods to 25% from 10%. Beijing said then it wouldn't take action until the U.S. increases took effect, which finally happened on Friday.
A 25% tariff applies to 2,493 items including industrial chemicals, electronic equipment, precision machinery and hundreds of food products, according to the Finance Ministry. A 20% penalty applies to 1,078 items, 10% to 974 items and 5% to 662 items.
Beijing is running out of U.S. imports for penalties due to the lopsided trade balance between the world's two largest economies. Regulators have targeted American companies in China by slowing down customs clearance for shipments and processing of business licenses.
The new tariffs are likely to hurt exporters on both sides, as well as European and Asian companies that trade between the United States and China or supply components and raw materials to their manufacturers.
The increases already in place have disrupted trade in goods from soybeans to medical equipment and sent shockwaves through other Asian economies that supply Chinese factories.
Forecasters have warned that the U.S. tariff hikes could set back a Chinese recovery that had appeared to be gaining traction. Growth in the world's second-largest economy held steady at 6.4% over a year earlier in January-March, supported by higher government spending and bank lending.
The tensions "raise fresh doubts about this recovery path," said Morgan Stanley economists Robin Xing, Jenny Zheng and Zhipeng Cai in a report.
The latest U.S. charges could knock 0.5 percentage points off annual Chinese economic growth and that loss could widen to 1 percentage point if both sides extend penalties to all of each other's exports, economists say. That would pull annual growth below 6%, raising the risk of politically dangerous job losses.
The latest talks ended with no word of progress on Friday. Chinese officials said they hoped that the U.S. side would meet them halfway, describing the standoff as just a "setback."
Trump might meet his Chinese counterpart, Xi Jinping, during next month's meeting of the Group of 20 major economies in Osaka, said Kudlow, his economic adviser, Larry Kudlow.
Chinese officials have invited the top U.S. envoys - Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin -to Beijing, Kudlow said on Fox News. But he said there were no "definite plans."
China's state media tried to reassure businesses and consumers the ruling Communist Party has the resources and policy tools to respond.
"There is nothing to be afraid of," said the party newspaper People's Daily. "The U.S.-instigated trade war against China is just a hurdle in China's development process. It is no big deal."
Trump started raising tariffs last July over complaints China steals or pressures companies to hand over technology.
Washington wants Beijing to roll back government support for Chinese companies striving to become global leaders in robotics and other technology. The U.S. and other trading partners say such efforts violate Beijing's free-trade commitments.
A stumbling block has been U.S. insistence on an enforcement mechanism with penalties to ensure Beijing carries out its commitments. Economists say Chinese leaders probably reject that as a violation of Chinese sovereignty.
The abruptness of Trump's announcement on May 5, just days before the last round of talks, about raising tariffs to 25% made companies see doing business in China as more uncertain, said Jake Parker, vice president of the U.S.-China Business Council, an industry group.
No matter what Washington and Beijing decide, "there is an enormous risk in the background that tariffs could come back into play at any moment," he said.
Chicago may feel the impact of the trade war
Chicago's economy could feel the impact of the trade war as all sorts of products made in the area now face 25% tariffs on their way to China.
U.S. Rep. Mike Quigley (D-Illinois) said the Chicago region could see a huge negative impact.
“There are hundreds and hundreds of companies in the region that trade. Eli’s Cheesecake trades. The recent tariffs that China has put on, involve wine, involve coffee, involve spinach. They involve things we care about,” he said.
Quigley warns against what he calls Trump’s “isolationist policies.”
“There are Americans who think we can isolate ourselves. The world will spin without us and we’ll be at a loss,” he said.