Donald Trump ramps up tariffs on China, escalating the high-stakes trade war

  • President Donald Trump more than doubled the tariff rate on more than a third of Chinese imports early Friday morning.
  • Beginning at 12:01 a.m. ET, a total of about $250 billion worth of shipments from China will face an import tax of 25%. 
  • The escalation has cast doubt on trade negotiations and is expected to lead to higher prices for American businesses and consumers.
  • Visit Business Insider's homepage for more stories.

President Donald Trump on Friday more than doubled the tariff rate on roughly $200 billion worth of Chinese imports, a move that sets the stage for retaliation from Beijing and that significantly raises the stakes in a yearlong trade war between the world's largest economies.

After accusing China of reneging on past trade commitments, the Trump administration has sought to increase pressure on Chinese officials in negotiations taking place this week. About $250 billion worth of Chinese products will now face a 25% duty when shipped to the US. Previously, a majority of those had been subject to a 10% import tax.

That could lead to higher prices on a wide range of everyday products from electronics to clothing. While Trump claims Chinese companies will pay the price, research suggests American businesses and consumers bear the brunt of tariffs.

Officials at the Chinese Commerce Ministry — who have denied that they made reversals on major aspects of a draft trade agreement — vowed on Wednesday to take countermeasures against increased tariff rates.

Those could include tariffs on American products or other trade barriers. China has already placed retaliatory duties on $110 billion worth of imports from the US, which had caused significant trouble for the US agricultural sector.

China trade talks
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China trade talks
Chinese investors monitor stock prices at a brokerage house in Beijing, Friday, May 10, 2019. President Donald Trump's increased tariffs on $200 billion in Chinese imports are taking effect, heightening tensions with Beijing. At 12:01 a.m. Eastern time Friday, the Trump administration raised the import taxes on those goods from 10 precent to 25 percent. China threatened to retaliate if Trump proceeded with his threat to raise those tariffs (AP Photo/Mark Schiefelbein)
Trader Ryan Falvey works on the floor of the New York Stock Exchange, Thursday, May 9, 2019. Stocks are opening broadly lower on Wall Street as investors keep a close eye on trade talks between the U.S. and China. (AP Photo/Richard Drew)
United States Trade Representative Robert Lighthizer, left, and Treasury Secretary Steven Mnuchin walk on Pennsylvania Avenue back to the White House after meeting with Chinese Vice Premier Liu He for trade talks Thursday, May 9, 2019, in Washington. (AP Photo/Jon Elswick)
Chinese Vice Premier Liu He leaves the Office of the United States Trade Representative in Washington, Thursday, May 9, 2019, during trade talks between the United States and China. (AP Photo/Manuel Balce Ceneta)
Chinese shopper walk by shelves displaying Chinese-made flatscreen TV's at Walmart in Beijing, Thursday, May 9, 2019. Chinese exporters of all sorts of products, from power adapters and computers to vacuum cleaners, are anxiously hoping trade talks in Washington this week will yield a deal that might stave off higher U.S. tariffs on imports from China. (AP Photo/Andy Wong)
Chinese Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, and U.S. Ambassador to China Terry Branstad talk after concluding their meeting at the Diaoyutai State Guesthouse in Beijing, China, May 1, 2019. Andy Wong/Pool via REUTERS
FILE - In this file photo taken Wednesday, May 1, 2019, Chinese Vice Premier Liu He, right, gestures as U.S. Treasury Secretary Steven Mnuchin, center, chats with his Trade Representative Robert Lighthizer, left, before they proceed to their meeting at the Diaoyutai State Guesthouse in Beijing. President Donald Trump turned up the pressure on China on Sunday, May 5, threatening to hike tariffs on $200 billion worth of Chinese goods. Trump's comments, delivered on Twitter, came as a Chinese delegation was scheduled to resume talks in Washington on Wednesday aimed at resolving a trade war that has shaken financial markets and cast gloom over the world economy.(AP Photo/Andy Wong, Pool, File)

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The escalation comes just as officials were thought to be nearing a deal. As recently as last week, there were high hopes for the two days of trade negotiations in Washington that began on Thursday.

While both countries have indicated a trade deal is still possible, questions have been raised about the timeline of and the ability to enforce an agreement.

"China can be made to fold, but it would require much more sustained action than the US has taken to now," said Derek Scissors, a resident scholar at the conservative-leaning American Enterprise Institute. "More likely, China does not fold and smaller-scale US action becomes permanent."

Trump on Monday also threatened to slap steep tariffs on all remaining Chinese imports, roughly $325 billion worth, a move that economists warn would have widespread effects on businesses and consumers.

"New tariffs on those goods that president has so far left untaxed will fall on American families, as these mostly hit textiles, apparel, shoes, home goods, etc.," said Mary Lovely, a trade scholar at the Peterson Institute for International Economics.

"Higher taxes on these goods are likely to be highly regressive, in that lower and middle class Americans spend a higher portion of their income on these Chinese imports than do higher income Americans," she continued.

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