WASHINGTON, D.C. — President Donald Trump declared the head of the Federal Reserve an “enemy” and further escalated tariffs on Chinese goods Friday after Beijing earlier in the day announced retaliatory tariffs on U.S. products.
Capping a heady series of events that sent stock markets tumbling, Trump accused China of “politically motivated” tariff increases, which he labeled a mistake.
In response, Trump said that as of Oct. 1, he would ratchet up duties to 30% on $250 billion of Chinese imports now taxed at 25%. Furthermore, he said the 10% tariffs he planned on the remaining $300 billion of Chinese imports starting Sept. 1 would be raised to 15%.
Earlier, Trump lit into Jerome H. Powell, whom he appointed as chairman of the U.S. central bank in 2017, after Powell stopped short of committing to make more interest rate cuts.
“My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” Trump said in a remarkable message on Twitter, comparing Powell to Chinese President Xi Jinping.
Trump also tweeted that he had “ordered” American companies “to immediately start looking for an alternative to China.” The statement has no force since it goes far beyond a president’s authority, but it indicated the depth of Trump’s agitation over his failure to prevail in a trade war with China that he had once predicted would be “easy.”
“We don’t need China and, frankly, would be far better off without them,” Trump tweeted.
The remarks combined with China’s announcement of counter-tariffs — a show of resolve on Beijing’s part — marked a notable worsening of the trade dispute, which is increasingly weighing on U.S. and global economic growth.
Trump and his economic team have been increasingly concerned about the economy, which is weakening and could foil Trump’s reelection bid if it were to fall into recession. The president has said he is considering tax cuts and other ways to bolster growth, but his own actions, including the increasingly costly trade war with China, have been a principal cause of economic turbulence.
Analysts said that although Trump has often pulled back from impulsive threats in the past, the day’s events had dashed remaining hopes for a near-term resolution to the trade conflict.
“I think it should be clear to everyone, both with the Chinese response and the way Trump reacted to it, that we’re accelerating the downward slope in economic relations, and that will expand to political and other relations as well,” said David Bachman, an expert on U.S.-China relations at the University of Washington.
U.S. and Chinese negotiators are scheduled to meet next month, but Riley Walters, a Heritage Foundation policy analyst, said Trump’s outburst “could blow that out of the water.”
“By the end of the year, we could have tariffs on every single thing we buy from China,” Walters said.
Sensing the pivotal significance of Friday’s events, the U.S. Chamber of Commerce said in a statement: “Time is of the essence. We do not want to see a further deterioration of U.S.-China relations. We urge the administration and the government of China to return to the negotiating table.”
Other business leaders responded coldly to Trump’s demand that they stop doing business with China.
“It is unrealistic for American retailers to move out of the world’s second largest economy, as 95% of the world’s consumers live outside our borders,” said David French, senior vice president of government relations at the National Retail Federation. “Our presence in China allows us to reach Chinese customers and develop overseas markets. This, in turn, allows us to grow and expand opportunities for American workers, businesses and consumers.”
Markets plunged immediately after Trump began his Twitter storm with the attack on Powell. All the major U.S. stock indexes ended sharply lower, with the Dow Jones industrial average falling 623 points, down 2.4% for the day. Government bond yields also sank, along with oil and other commodities.
“The other shoe keeps dropping on America’s economic war with China, and as China and Trump ramp up the rhetoric and put on new tariffs, stock investors have had enough and want out,” said Christopher Rupkey, chief economist at MUFG Union Bank in New York.
Powell, in a highly anticipated speech Friday morning at the Fed’s annual conference in Jackson Hole, Wyoming, pledged to do whatever the Fed could to sustain U.S. economic growth. But the Fed, which made a small cut in a key interest rate last month, is divided on how aggressively it should respond in the face of economic crosscurrents that include strong domestic consumer spending and significant trade policy uncertainty.
Trump has demanded the Fed cut a full percentage point in its benchmark interest rate and take other steps to lower the value of the dollar to spur exports.
Not hearing the message he wanted, Trump tweeted Friday: “As usual, the Fed did NOTHING! It is incredible that they can ‘speak’ without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work ‘brilliantly’ with both, and the U.S. will do great.”
Soon after, Trump went on to attack China, which had announced additional tariffs of 5% to 10% on $75 billion of U.S.-made goods, to take effect on Sept. 1 and Dec. 15 — the same dates that Trump’s new tariffs on $300 billion of Chinese products are set to go into effect.
Beijing didn’t identify what U.S. goods would face higher tariffs, saying only that they would affect a total of 5,078 products. In addition, China said it would resume imposing additional tariffs of up to 25% on American-made vehicles and auto parts starting Dec. 15.