President Donald Trump said he will not tolerate Beijing imposing retaliatory tariffs as he tries to end the trade imbalance between the two nations. | Win McNamee/Getty Images Trump threatens tariffs on all $500 billion worth of Chinese imports

President Donald Trump is prepared to take his tariff fight with China to the max — and believes the stock market’s rise since the election gives him the cushion to do it.

Trump told CNBC in an interview that aired early Friday morning that he would be willing to crank up the tariff pressure on China to the point of hitting $500 billion worth of Chinese imports — meaning U.S. import duties would tax nearly all of the $505.5 billion in total goods and services that Beijing exported to the U.S. last year.


“This is the time. You know the expression we’re playing with the bank’s money,” he told CNBC's Joe Kernen in an interview on “Squawk Box.”

The comments signal growing confidence that Trump thinks a further escalation in a trade war with China won’t cause mass economic destruction as critics have argued.

Pressed about the possibility that such a move could drag down the stock market, Trump said, “If it does, it does.”

“I would have a higher stock market right now, it’s already up almost 40 percent, as you know, since the election,” Trump said. “It could be 80 percent if I didn’t want to do this, but ultimately, what I’m doing is making it so it’s right.“

Trump has made resetting U.S. trade relationships around the globe a priority for his administration, controversially targeting longtime allies and partners like South Korea, Mexico, Canada and the European Union.

But the president has shown a special ire for China, a nation he has accused of unfair trade practices, including intellectual property theft and forced technology transfers. Already, Washington and Beijing have both imposed tit-for-tat tariffs, with China’s batch targeting industries like agriculture that are big economic drivers in states Trump carried in the 2016 presidential election.

Trump in the interview said he is concerned only with the principle of fairness when it comes to America’s trade relationship with China, not with the potential political trouble that a trade war with Beijing could stir ahead of November’s midterm elections.

“Look, I’m not doing this for politics,” he said. “I’m doing this to do the right thing for our country. We’ve been ripped off by China for a long time. And I told that to [Chinese] President Xi [Jinping].”

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Trump on Twitter also took shots at China and the European Union, accusing them of lowering the value of their currencies, and criticized the Federal Reserve’s gradual interest rate increases — actions that could undermine the impact of new tariffs.

“China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets [sic] stronger and stronger with each passing day — taking away our big competitive edge. As usual, not a level playing field,” Trump wrote on Twitter.

“The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates — Really?”

Trump’s comments echo a long-standing complaint from U.S. manufacturers who argue that China and other countries often artificially depresses the value of their currency to give their companies an export advantage. A lower Chinese renminbi — China's own currency — relative to a stronger dollar allows Chinese companies to sell their products more cheaply in the United States.

But the dollar lately has been strengthening against essentially all currencies, said Fred Bergsten, senior fellow and director emeritus at the Peterson Institute for International Economics.

“The fact that the Chinese currency is going down is not unique,” he said. “The question is whether the Chinese officials have done anything deliberate to push it down.”

Beijing has historically bought dollars and sold renminbi to lower the value of its currency. But Bergsten noted that over the last couple of years, China has actually been intervening in currency markets to make sure the renminbi doesn’t drop further.

“What they’ve been doing the last few days or weeks, we don’t really know because they don’t publish their data in real time,” he added.

If China is devaluing its currency to respond to Trump’s tariffs, the implications are significant. Every 1 percent change in the value of the dollar is worth about $30 billion in trade over a year, Bergsten said.

“My thesis has been that they would not want to create that additional front in the trade war … but it is a potential tool they could use,” he said. “The exchange rate numbers are much more powerful than any of these tariffs or trade policy changes, most of which have little if any net effect on the trade balances.”

The People’s Bank of China reportedly weakened its currency by 0.9 percent on Friday, the largest move in two years.

If China is beginning to devalue its currency to counteract the tariffs, the U.S. could respond by buying an offsetting amount of the renminbi. Rep. Bill Foster (D-Ill.) at a hearing this week urged Fed Chairman Jerome Powell to look into readying such a response in case Beijing resumes devaluation of the renminbi.

“The currency issues are entirely up to Treasury,” Powell responded. “I don’t know whether they’ve technically consulted with us about it or not. It’s the first I’m hearing about it.”

Critics argue that Trump’s criticism of a strong dollar as the result of rising U.S. interest rates and decreasing foreign currency values could provide cover for other countries to continue to devalue their currencies.

“There’s no reason why the Japanese shouldn’t go and try to weaken the yen, and their cover is: Well, obviously that’s what the Americans are trying to do, we’re just doing it in response to them,” said Tony Fratto, a former assistant Treasury secretary and White House official under President George W. Bush.

Despite Trump’s complaint, the Treasury Department decided in April against formally labeling China a currency manipulator in its latest report on foreign exchange rate practices.

Treasury said China will maintain its spot on the “monitoring list” — along with Germany, Japan, South Korea, Switzerland and India — as nations whose currency practices “require close attention.”

Treasury’s decision to not name China a currency manipulator follows the practice of every U.S. administration since the World Trade Organization was created in 1994.

Trump had said he would name China a currency manipulator on his first day in office, but he hasn’t followed through on that threat in any of the three currency reports Treasury has released since he took office.

The Chinese government on Thursday lashed out at remarks earlier this week by White House National Economic Council Director Larry Kudlow that blamed China's president for failing to reach an agreement with the U.S. to end the trade standoff.

“Right in front of everyone's eyes, the U.S. went back and forth and ate its own words, and the U.S. official still dared to call white black and tried to shift the blame onto China,” Chinese Foreign Ministry spokeswoman Hua Chunying said in a press conference. “That honestly entails some extraordinary imagination and is just preposterously shocking.”



The back-and-forth between the two economic powers has sparked concerns of a looming trade war that could slow down what has been a strong economy under Trump. A slower economy could lead the Fed to hike rates more slowly — or leave them where they are. At worst, prolonged trade tensions could stoke inflation while denting economic growth, further complicating the path for the central bank, which aims to achieve a balance of sustainable economic growth without letting prices run wild.

A trade war could also harm certain American industries in particular. Among the most vulnerable would be the agriculture sector, which relies on exports to China for a significant portion of its annual revenue. Trump has promised that his economic strategy will ultimately benefit farmers, and has asked Agriculture Secretary Sonny Perdue to come up with a plan to help farmers who are hurt by retaliation. On Friday Trump sought to offer further reassurances.

“Farmers have been on a downward trend for 15 years. The price of soybeans has fallen 50% since 5 years before the Election,” Trump wrote online. “A big reason is bad (terrible) Trade Deals with other countries. They put on massive Tariffs and Barriers. Canada charges 275% on Dairy. Farmers will WIN!”