Boats sit moored at the typhoon shelter as residential apartment blocks stand beyond in Hong Kong, China. (Photographer: Paul Yeung/Bloomberg)

China to Cancel Talks If Trump Moves Ahead With Tariffs, Sources Say

(Bloomberg) -- China will reject new trade talks if President Donald Trump moves ahead with the next round of U.S. tariffs on Chinese products, throwing into doubt the prospect of a diplomatic breakthrough, according to two people familiar with the matter.

The administration earlier this month floated the idea of talks led by Treasury Secretary Steven Mnuchin, with Chinese Vice Premier Liu He expected to lead the Beijing delegation. But President Donald Trump last week ordered aides to move forward with tariffs on as much as $200 billion in Chinese goods, and a 10 percent duty could be imposed as soon as Monday or Tuesday, according to five people familiar with the matter.

Beijing has already said it will retaliate for the new round of tariffs. Chinese officials have also signaled to U.S. counterparts that Mnuchin’s talks won’t happen.

China to Cancel Talks If Trump Moves Ahead With Tariffs, Sources Say

The planned tariff rate is less than half the 25 percent level the administration had initially considered. Still, American consumers could start feeling the cost in everyday goods, as the latest move brings all Chinese imports subject to a new tariff to $250 billion, roughly half of China’s shipments to the U.S. last year.

The value of targeted Chinese items could be lowered to $180 billion in this round, depending on what’s excluded from the final list of products, according to one of the people.

Unfair Trade

Trump is barreling ahead with his vow to punish China for alleged unfair trading practices, despite warnings from many economists and the International Monetary Fund that an all-out trade war could undermine the strongest global upswing in years. The White House had no immediate comment on Monday.

American businesses have come out strongly against the tariffs, saying they have the potential to raise retail prices. Apple Inc. said last month the proposed duties on $200 billion cover a wide range of products used in its U.S. operations.

The Trump administration has been revising the list of Chinese goods that will be hit by tariffs following a feedback period and more than a week of public hearings last month. Most U.S. businesses that submitted comments were opposed to punishing China with tariffs.

U.S. stock futures edged lower amid investor concerns a heightened trade war will crimp corporate profits and undermine economic growth. The S&P 500 index was down less than 1 percent at 11:00 a.m. in New York on Monday.

The president early on Monday seemed to undermine any efforts for a negotiated solution, saying tariffs have bolstered the U.S. bargaining position, while cost increases to consumers have been negligible. He warned of further levies.

“Tariffs have put the U.S. in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country - and yet cost increases have thus far been almost unnoticeable," Trump said on Twitter. "If countries will not make fair deals with us, they will be ‘Tariffed!’"

The administration since July has slapped 25 percent tariffs on $50 billion of Chinese goods, sparking immediate in-kind retaliation. China has said it will respond to the next round of U.S. levies with retaliatory tariffs on $60 billion of U.S. goods ranging from liquefied natural gas to aircraft.

Officials from both countries have met four times for formal talks, most recently in August, when Treasury’s undersecretary for international affairs, David Malpass, led discussions in Washington with Chinese Vice Minister Wang Shouwen.

Antagonizing Beijing

Heaping more duties on Chinese goods will only further distance Beijing from negotiating an end to the escalating conflict, according to one of the people.

White House economic adviser Larry Kudlow has indicated that Trump could be willing to meet face-to-face with Chinese President Xi Jinping to smooth over trade tensions at the United Nations General Assembly later this month or at the Group of 20 nations leaders’ summit in Argentina from Nov. 30-Dec. 1.

Economists at UBS Group AG say even a 10 percent tariff would slow the U.S. economy in the fourth quarter by enough to stop the Federal Reserve hiking interest rates again in December.

©2018 Bloomberg L.P.