The three major U.S. stock indexes sank on Wednesday as the White House moved to make good on President Trump’s threats to impose an additional $200 billion in tariffs on Chinese imports, dismissing the concerns of economists, corporate executives and GOP lawmakers.
The blue-chip Dow Jones industrial average dropped 0.88 percent in early New York trading, while the broader S&P 500 fell 0.71 percent and the tech-heavy Nasdaq slid 0.55 percent. The three widely-followed gauges, which gained steadily in 2017 amid bets that Trump and a Republican Congress would reduce taxes and trim government regulation, have all given up their highs as the president began wide-ranging trade disputes with both U.S. allies and competitors.
[More: China vows retaliation after $200B tariff threat from US]
“The last thing America’s manufacturing workers need is an escalating trade war,” said Jay Timmons, head of the National Association of Manufacturers, which represents industrial companies with a combined payroll of more than 12 million people that contributes $2.25 trillion to the U.S. economy annually. “China cheats, and manufacturers want to see China held accountable, but more tariffs like these will punish America’s manufacturing workers and could undermine our hard-won gains thanks to tax and regulatory reform.”
Trump began acting on his protectionist instincts with double-digit tariffs on steel and aluminum imports in March, then followed up by imposing 25 percent duties on an initial $34 billion of Chinese imports, with an additional $16 billion already in the works. When Beijing promised to retaliated, Trump threatened levies on $400 billion more in goods; the list of proposed items released Tuesday represented half that amount.
It was “a stunning and unfortunate development for U.S. manufacturers and consumers,” the American Chemistry Council, a trade group representing the chemicals industry, said Wednesday. “We strongly urge the administration to create a strong, multilateral coalition to bring an end to this unnecessary trade war.”
The council also opposes 25 percent tariffs on auto imports, a proposal on which the Commerce Department is reviewing comments as part of an investigation that’s required before it can use national security grounds to impose them. Trump employed the same justification for the metals tariffs, prompting pushback from allies including Canada, Europe and Mexico who said it was groundless.
While Republican lawmakers have also criticized the move, a measure from Sen. Bob Corker of Tennessee that would require Congressional approval for national security tariffs, has yet to receive a vote.
The Senate did, however, pass a non-binding resolution Wednesday directing a House-Senate committee to include language in a spending bill giving Congress input. The motion passed 88-11, with support from all Democrats and 38 Republicans.
While the initial tariffs on $50 billion of Chinese imports — the $34 billion in effect plus the $16 billion on the table — were carefully designed to minimize economic damage, achieving the same result with $450 billion will almost certainly harm the supply chain relied on by U.S. companies and consumers, said Seth Carpenter, an economist with Swiss bank UBS.
“Many of the goods on the longer list are imported largely from China, making substitution essentially impossible,” he wrote in a report. “Such an escalation pushes the situation from a trade skirmish to a trade war.”
[Trump’s trade war rattles Chuck Grassley: ‘I hope he knows what he’s doing’]
