China to Raise Tariffs on $60 Billion in US Goods Starting June 1

The U.S.-China trade war escalated Monday with Beijing signaling it plans to raise tariffs on about $60 billion in U.S. goods on the heels of the United States slapping new tariffs on $200 billion in Chinese goods last week.

Some 2,493 goods will see levies raised to 25 percent, the Chinese government said via its official website.

The announcement came after President Donald Trump warned that things “will only get worse” for China if it retaliated against his decision to increase tariffs on Chinese goods during last week’s ultimately unsuccessful trade talks.

“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries. Too expensive to buy in China. You had a great deal, almost completed, & you backed out!” Trump said in one of a series of tweets Monday morning.

Stocks fell sharply after China decided to raise tariffs on some U.S. goods Monday, the Dow Jones Industrial Avenue plunging 650 points at one point while a 3.4 percent drop in tech stocks pushed the S&P 500 down 2.5 percent.

In addition, the Nasdaq Composite dropped 3.3 percent.

According to the Chinese Global Times newspaper, which tends to be more outspoken in contrast to other state media, retaliatory measures under consideration in the Asian nation also include the nation’s stopping purchases of U.S. agricultural and energy products, a reduction in orders from Boeing, and new restrictions on the import of U.S.-based services.

Boeing’s 737 makes up the majority of the company’s more than 5,600 current orders, and China accounts for a third of all 737 orders, according to industry analysts. That places the company at a “retaliatory tariff risk,” Morgan Stanley said Monday.

Boeing shares fell more than 4 percent in trading Monday after the Chinese Global Times report.

In a statement the aerospace giant said, “We’re confident the US and China will continue trade discussions and come to an agreement that benefits both US and Chinese manufacturers and consumers.”

Boeing isn’t the only American company being hurt by the trade posturing. apple shares were also off about 4 percent in early trading Monday.

In a note to investors last week, Morgan Stanley analyst Katy Huberty wrote, “Apple has one of the most significant exposures to Chinese exports to the U.S, given final assembly for many of its consumer devices is located in China.

“Given the reliance on China’s established, low-cost labor force and expertise in manufacturing/tooling, a large-scale move out of the country would not only be costly, but could take multiple years to complete, potentially raising the odds of execution risk,” Huberty said.

The Global Times also reports that Chinese scholars are actively discussing the possibility of dumping U.S. Treasuries and how to do it effectively.

In the meantime, the White House’s top economic adviser, Larry Kudlow said over the weekend that the president is sticking to his guns on the trade war with China, predicting the impact of a new round of tariffs on the U.S. economy will be minimal.

Contradicting an earlier statement by the president during an appearance on “Fox News Sunday,” Kudlow conceded that U.S. importers and consumers, not China, will pay the tariffs on imported Chinese products.

But he insisted “both sides” will suffer the impact of the tariffs.

Losing some U.S. jobs and taking a hit to growth was a reasonable risk to take to correct “decades” of unfair trade practices by Beijing, especially since the U.S. economy is strong, Kudlow said.

“You gotta do what you gotta do,” he said.

Kudlow also revealed Beijing has extended an invitation to U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin back to resume talks.

Though no date has been set for those discussions, Kudlow said Trump will likely meet with Chinese President Xi Jinping during the G20 meeting in Osaka, Japan, in late June.

In China on Monday the People’s Daily, the communist party’s official mouthpiece, ran a lengthy front-page editorial in which it said while China does not want to have an antagonistic relationship with the U.S., the Trump administration should refrain from trying to “control” its Asian counterpart.

As things stand now, the editorial said, the U.S. risks making “mistake after mistake” and making matters far worse before they get better.

“The way China and the US evaluate each other’s strategic intentions will have a direct impact on their policies and the type of relationship we will develop,” The People’s Daily editorial said. ““There cannot be mistakes on this fundamental issue, or else there will be mistake after mistake.”

“At present, US policymakers have placed a big bet to ‘fight,’ allowing immediate benefits to cloud their long-term perception,” the editorial said. “Despite the changes in the respective conditions of the two countries and the international landscape, both sides need to maintain stability – not to be confused by a single moment or incident.”

“China does not want to change the United States, and even more so, it does not want to displace the US; the US cannot control China, and it is even less likely that it can deter China’s development,” it said.

The piece also warned that China doesn’t fear a prolonged trade war.

“Our Chinese system of governance gives us a unique advantage, giving us the stamina to face the risks and challenges,” it said.