China Retaliates With Higher Tariffs as Trump Defends U.S. Approach

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China Retaliates With Higher Tariffs as Trump Defends U.S. Approach

With talks at an impasse, economists are warning that consumers could soon start to feel the pain from Mr. Trump’s trade fight, particularly if the United States taxes all of China’s imports. While economists differ in their forecasts of how much tariffs on both sides will reduce economic growth, most agree that the cost of tariffs is passed on to businesses or consumers in the form of higher prices.

The president’s top economic adviser, Larry Kudlow, acknowledged on Sunday that both the United States and China would “suffer” as a result of the tariffs. But he insisted that America would benefit in the end if the trade war forces China to give better treatment to American businesses than it had in the past.

Other observers disagreed with the president’s approach.

“If there was a policy action that the administration could unilaterally engage in that would add half a point to G.D.P. growth, that would be something that people would be quite excited about,” said Michael Strain, the director of economic policy studies at the American Enterprise Institute. “This is the opposite.”

Eric Rosengren, president of the Federal Reserve Bank of Boston, said that the Fed would need to think about cutting rates if the economy were to slow in such a way that might push unemployment higher and make 2 percent inflation harder to reach. For now, the Fed is comfortable standing pat but that could change if the trade war begins to chip away at global growth.

“I think monetary policy is appropriate for now,” Mr. Rosengren said in an interview. “If the global economy were to slow down because of concerns about trade, that is something that we’d have to think carefully about.”

[How President Trump’s tariffs on Chinese goods will hit Americans’ shopping carts.]

Because China’s imports from the United States total considerably less than $200 billion, it has not had the option of matching the United States dollar for dollar on the tariff threats. Last September, China had matched Mr. Trump’s 10 percent tariffs on $200 billion a year in goods with its own tariffs of 5 to 10 percent on $60 billion a year in American goods.

On Monday, China’s Finance Ministry raised those tariffs by introducing four new categories for the $60 billion in goods. The tariffs on those four categories are 25, 20, 10 and 5 percent.

The Finance Ministry did not specify the dollar value of goods in each of the four categories. But the largest number of tariff codes in the $60 billion was assigned to the 25 percent category, suggesting that China was raising the tariffs on many imports to that level.

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