China Will Raise Tariffs On $60B Worth Of US Goods To 25% By June 1

Investors received more bad news Monday morning as an escalation of the trade war between the U.S. and China drove stocks even lower following a horrible performance last week. The latest wave of selling comes on reports that China will be raising tariffs on $60 billion in U.S. goods to 25 percent in retaliation to U.S. President Donald Trump’s latest round of tariff hikes on China.

What Happened

Last week, President Trump announced the U.S. would be raising tariffs on $200 billion of Chinese imports from 10 percent to 25 percent.

On Monday, the Chinese Finance Ministry said China will be retaliating by raising tariffs on $60 billion of U.S. goods from 10 percent to 25 percent starting on June 1. The tariffs primarily impact the U.S. agriculture business and will include goods such as peanuts, sugar, wheat, chicken and turkey.

“You had a great deal, almost completed, and you backed out!” Trump tweeted of China’s president Xi Jinping on Monday morning. “China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries.”

Trade War Impact

Despite Trump’s tariffs, the U.S. trade deficit climbed to a record high of $419.2 billion in 2018.

On Sunday, Trump economic advisor Larry Kudlow said both the U.S. and China will suffer from an escalating trade war. In an interview with Fox News, Kudlow agreed that U.S. importers will bear the brunt of the new tariffs and will likely pass along much of those higher costs to American consumers. Despite the market jitters, Kudlow reiterated his support for Trump’s decision.

“This is a risk we should and can take without damaging our economy in any appreciable way,” he said.

Market Reaction

On Monday, JPMorgan analyst James Sullivan said the trade war will not be going away any time soon.

“These trade conversations are now part of the backdrop of global markets for the next ... 10 to 20 years as these countries and economies work out their relative place in the world and how we reorder the overall global structure to account for the rise of China, to account for a multi-polar environment,” Sullivan told CNBC.

If Sullivan’s prediction is correct, investors should brace for even more market jitters. The SPDR S&P 500 ETF Trust SPY is now down 3.1 percent and the iShares FTSE/Xinhua China 25 Index FXI is down 7.9 percent since May 1.

Here’s how several big-name stocks with China exposure reacted to the latest tariff news on Monday morning:

• Apple, Inc AAPL was down 4.3 percent.
• Boeing Co BA was down 2.6 percent.
• Wynn Resorts WYNN was down 3.5 percent.
• Qualcomm, Inc. QCOM was down 2.1 percent.

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