President Donald Trump has projected optimism amid this latest salvo, touting Monday the “unexpectedly good first quarter 3.2% GDP” that he attributed to the China tariffs. Trade China to retaliate on $60B in U.S. goods, defying Trump's warning The president accused Beijing of backing out of a 'great deal' last week.

China is set to fire the next salvo in the escalating trade conflict with the United States, announcing on Monday it will raise tariffs on $60 billion in U.S. goods at the start of next month.

China's Ministry of Finance said it will hike tariffs to as high as 25 percent on the $60 billion in American imports. Those rates will rise from levels of 5 or 10 percent, depending on the goods. The announcement marks the latest development in a growing tit-for-tat conflict between the two economic giants and came just after President Donald Trump had warned China against retaliating.


Trump, however, said later on Monday that he was negotiating from a position of strength, pledging to mitigate much of China’s retaliation, which he predicted would target U.S. farmers.

“I love the position we are in. There can be some retaliation, but it can't be very, very substantial by comparison,” he told reporters in the Oval Office. “I think we’re in a very good position, and I think it’s only going to get better.”

Since raising tariffs on $200 billion in Chinese goods late last week, Trump has been publicly warning Beijing not to hit back, saying it "will only get worse" for the country if it takes further action.

Beijing had previously pledged to take "necessary countermeasures" but had not made a move to do so until Monday's announcement.

“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,” Trump said in a tweet early Monday, prior to Beijing's announcement. “Too expensive to buy in China. You had a great deal, almost completed, & you backed out!”

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! — Donald J. Trump (@realDonaldTrump) May 13, 2019

On Monday evening, Trump said it should be clear in “three or four weeks” if a U.S. delegation’s recent trip to China for trade talks was successful, according to a pool report. “I have a feeling it’s going to be very successful,” he said.

He threatened Monday afternoon that more tariffs could be on the way, saying that he had “the right to do another $325 billion at 25 percent in additional tariffs” on Chinese goods. His administration filed the paperwork late Monday afternoon to begin the process of slapping on those tariffs.

Earlier in the day, the president said that he had not made a decision on whether to impose duties on the final set of goods – a move that would affect essentially all remaining U.S. imports from China.

The latest filing indicates that a final decision on additional penalties would likely not be made before Trump is set to meet Chinese President Xi Jinping at the G-20 summit in Japan at the end of next month.

The two sides have been locked in heightened tensions since U.S. officials said Beijing earlier this month "reneged" on a number of commitments it had previously agreed to in negotiations. A delegation of Chinese negotiators traveled to Washington late last week to try to break the impasse, but talks ended early Friday without any resolution.

Discussions are expected to continue among high-level officials in the coming weeks.

"We anticipate that we’ll have continued discussions and negotiations, and we’ll work on the logistics of that," Treasury Secretary Steven Mnuchin told POLITICO Monday afternoon after a speech in Washington hosted by state insurance regulators. He added that the expectation is that U.S. officials will travel to Beijing for the next round after Chinese negotiators "were just here."

The escalating tensions are rattling the markets and forcing companies to start paying more for their imports. The Dow Jones Industrial Average was down more than 700 points at one point. It closed the day more than 617 points lower.

The broader Standard & Poor's index of 500 major stocks similarly fell about 2.4 percent Monday.

The drop reflects the nervousness American companies are feeling about the prospect of an escalated trade war and higher tariffs.

Some in the Trump administration have begun to acknowledge that a protracted trade conflict would hurt the U.S. as well as China. Kudlow — who is considered a free-trader within the Trump administration — conceded in a Fox News interview on Sunday that American businesses and consumers will suffer because of the increase in tariffs.

“In fact, both sides will pay,” Kudlow said . “Both sides will suffer on this.”

And the impasse continues, that concern is growing louder. Senate Finance Committee Chairman Chuck Grassley urged Trump to press forward on his goal of getting China to change its trade practices but warning that more tariffs will hurt both countries.

President Xi Jinping and his Chinese government have made it clear they won’t stand idly by in the U.S.-China trade war. | Andrea Verdelli/Getty Images

"This intensifies the urgency of reaching an agreement as soon as possible to end this trade war," Grassley said in a lengthy statement on Monday. "Americans understand the need to hold China accountable, but they also need to know that the administration understands the economic pain they would feel in a prolonged trade war."

That assessment matches what most mainstream economists believe to be the case but stands in stark contrast to Trump's own views, which are centered on the idea that duties mean China will pay more money directly into the U.S. Treasury.

“Their [sic] is no reason for the U.S. Consumer to pay the Tariffs,” Trump wrote on Twitter Monday.

In reality, the tariffs are taxes paid by importers, such as U.S. companies, which bring in products from China. Those costs are typically passed on to consumers in the form of higher prices, which can drive down demand for Chinese imports.

Goldman Sachs wrote in a new research note over the weekend that the cost of penalties imposed so far under the Trump administration has fallen "entirely" on U.S. businesses and households. It forecast that a further increase in trade tensions could lead to a 0.4 percent hit to GDP.

In his flurry of tweets Monday morning, Trump went on to say that U.S. companies worried about the tariffs could simply avoid them by purchasing their goods from countries not subject to the steep tariffs levied by his administration or by shifting their production to the U.S.

But companies that do import parts from China often do so for a variety of reasons, including that the goods might not be available elsewhere or would be far more expensive. Rerouting supply chains to avoid purchasing from China is also a costly and time-consuming endeavor that could also prompt some companies to raise prices to offset the costs.

Trump also sought to emphasize on Monday his belief that the U.S. has the stronger negotiating position, saying that Beijing cannot impose tariffs on the same dollar amount of American goods because the U.S. does not export as much to China as it imports.

But the Chinese retaliatory tariffs alone will still be substantial. Under the new proposal, nearly 2,500 American items will now face a 25 percent tariff, while more than 1,000 items will be subject to a 20 percent tariff.

Goods hit with the 25 percent duty include animal products, frozen fruits and vegetables and seasonings and goods hit with the 20 percent fee include baking condiments, chemicals and vodka, according to The Wall Street Journal.

Tariffs will stay at 5 percent for certain items, including vehicle parts, medical equipment and farm equipment such as tractors, the paper reported.

Another 1,000 items will have a 10 percent duty and 595 items a 5 percent tariff. Beyond that, Beijing could ultimately retaliate against the U.S. with more than just tariffs. Hu Xijin, editor-in-chief of Chinese state media tabloid Global Times, said Monday that China could "stop purchasing U.S. agricultural products and energy, reduce Boeing orders and restrict U.S. service trade with China," among other options.

Still, Trump has sought to project optimism in the face of this latest salvo with China, touting on Monday the “unexpectedly good first quarter 3.2% GDP” that he attributed to the China tariffs.

“Some people just don’t get it!” he added.

Zachary Warmbrodt and Doug Palmer contributed to this report.