By Caitlin Oprysko, Nancy Cook, and Adam Behsudi
President Donald Trump on Friday lobbed Twitter attacks at China, U.S. companies and his handpicked Federal Reserve chief as he warned of an unspecified action against the world’s No. 2 economy coming later Friday — a reflection of Trump’s rising anxiety about an increasingly troubled economic picture at home.
He responded with fury after taking a pair of blows Friday morning when China announced a fresh round of tariffs and Fed Chairman Jay Powell did not explicitly pledge aggressive interest rate cuts as the president has demanded.
Erupting on Twitter, the president vowed a yet-to-be-announced counterattack against Beijing, ordered U.S. companies to find an alternative to doing business with China and suggested Powell could be a “bigger enemy” than the country’s communist leader.
It was unclear exactly what Trump meant with his directive to the U.S. companies or whether he plans additional action to execute the order, but the tweets captured the president's frustration as his escalating trade war with China weighs on the economy and heightens the risk of a recession during an election year.
"Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue," Trump wrote. "I won’t let that happen! We don’t need China and, frankly, would be far better off without them."
He continued, "The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States."
Investors had been in a relatively forgiving mood after both the China tariffs and the Fed speech. But Trump’s tweets triggered a sharp sell-off in the stock market, with the Dow Jones Industrial Average down more than 500 points in afternoon trading.
Trump’s tweets took the president’s aides by surprise, triggering the latest instance of the White House making policy on-the-fly after Trump issued a directive via Twitter. Trump huddled midday with his economic team including trade adviser Peter Navarro, U.S. Trade Representative Robert Lighthizer, National Economic Council Director Larry Kudlow and Treasury Secretary Steven Mnuchin, who was on vacation and called into the meeting by phone, according to a senior administration official.
The president seems unlikely to back away from the trade stand-off with China anytime soon, close White House allies and current and former administration officials said.
During a two-hour meeting in the Oval Office on Monday with several top aides and Cabinet members, Trump repeatedly told attendees “I just want a fair deal” when it comes to China. The meeting included discussion of both China and trade, among other topics, ahead of this weekend’s G7 summit.
“The president is optimistic and confident that the U.S. has the benefit and the upper hand with China,” insisted one former senior administration official. “I do not think he will back down.”
Current and former White House aides viewed China’s retaliatory tariffs on Friday — and Trump’s Twitter response to them — as both countries angling for dominance ahead of the G7.
China on Friday announced a fresh round of tariffs on $75 billion in U.S. goods ranging from 5 percent to 10 percent. They will go into effect in waves beginning Sept. 1 and Dec. 15, Beijing said.
China’s state-run news agency Xinhua on Friday quoted the country’s tariff commission, which said the penalties were in response to levies threatened by the U.S. on $300 billion worth of Chinese goods.
“The U.S. measures have led to the continuous escalation of China-U.S. economic and trade frictions, which have greatly harmed the interests of China, the U.S. and other countries, and have also seriously threatened the multilateral trading system and the principle of free trade,” Beijing said.
The announcement from China was shortly followed by a speech from Powell in which he said the central bank stands ready to do what is necessary to support the record-long U.S. economic expansion. But he did not signal that significant interest rate cuts will be coming soon, angering Trump.
"As usual, the Fed did NOTHING! It is incredible that they can 'speak' without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work 'brilliantly' with both, and the U.S. will do great," Trump tweeted.
He then launched a personal attack on Powell, writing, "My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?"
Among the options Trump was weighing for hitting back against Beijing is increasing a 10 percent tariff to 25 percent on almost all remaining Chinese imports, said a person close to the deliberations.
Another option on the table was reversing a special waiver granted this week that gave U.S. companies three more months to conduct a limited amount of business with blacklisted Chinese telecommunications giant Huawei, the person said.
Trump’s outrage at China’s retaliation was largely driven by his perception that the Chinese economy is on the brink of ruin and Beijing would be reluctant to make a move that would further put it in jeopardy, the person said.
“It was a great surprise to Trump,” the person said of China’s announcement that it would retaliate.
Trump has repeatedly claimed in recent days that U.S. tariffs were causing China to hemorrhage jobs, up to 2.5 million “in a very short period of time,” and has cited other numbers.
“They had the worst year in 27 years, but I think it was actually 52 or 54 years. It was the worst year they've had in a half a century. And that's because of me,” Trump told reporters Wednesday.
The person close to the talks said Trump’s view has been largely informed by Navarro, who has advocated a complete decoupling between the U.S. and Chinese economies. Trump on Friday echoed that sentiment by telling U.S. companies to leave China.
Other aides have cautioned Trump not to discount China’s ability to weather economic pain and its willingness to retaliate against the additional tariffs he announced on Aug. 1, the person said.
Meanwhile, a U.S. companies in China say they aren’t going anywhere despite the challenges of operating in that market.
“China will contribute a significant proportion of global growth in the decades ahead,” said Jake Parker, senior vice president of the U.S.-China Business Council. “Missing out on that opportunity would weaken the competitiveness of U.S. industry and harm the United States national interests at home.”
Earlier on Friday, Navarro, who provides a strong protectionist voice on U.S. trade talks within the Trump administration, denied that China's announcement caught the White House off guard and downplayed the impact of the move.
“This was a move that was well-signaled,” Navarro said on CNN. “It's breaking news, I guess, but it was well-anticipated.”
The latest front in the tariff battle between China and the U.S. comes as fears grow about a recession. Trump has tweeted relentlessly about the issue in recent days, pinning blame on Powell while he heralded what he says is a booming economy that he's accused the news media of trying to tank to hurt his reelection prospects.
Though he conceded the economy was slowing, Navarro blamed the Fed for slow-walking rate cuts, calling economic worries "a pure Federal Reserve effect on higher interest rates."
Navarro was pressed on some business leaders’ admissions that the uncertainty due to the trade war was dampening investment, but he again blamed monetary policy emanating from the Fed.
“They can't make investments because the Fed raised interest rates too far, too fast,” he argued. “If you raise interest rates, you cut down investment and you cut down exports.”
Ahead of Powell's speech, both Navarro and Trump appeared confident in what the Fed chief would say, sentiments that apparently evaporated immediately after the Fed chairman’s remarks at a Kansas City Fed conference in Jackson Hole, Wyo.
"Now the Fed can show their stuff!" Trump said about an hour before the speech.
Navarro also talked up Powell's remarks, framing them as a potential counterweight to the tariff news.
"What's important today — look, this is a big day, tomorrow is a big day. It's a big day today because we're going to get better signals from the federal reserve as to whether they're going to get in line with over 30 central banks around the world that have been cutting rates," he said, adding later that forecasting aggressive rate cuts should show "he's got America's back."
The central bank and Powell have become favorite punching bags of Trump as ominous economic signs have emerged ahead of next year’s election. But Navarro, unprompted at the top of the CNN interview, said there's "no anxiety in the White House about the economy.”
"We don't run around the West Wing with anxiety. We look at the chessboard and we see basically a strong Trump economy growing at 2 percent because of tax cuts, deregulation, cheap energy and trade," he said.
Navarro also defended Trump's decision this month to delay tariffs on certain Chinese goods like electronics and some clothing until Dec. 15, citing a desire to avoid the tariffs hampering the Christmas shopping season. He would not say if Trump would reimpose those tariffs in light of China's latest move, saying the White House would have conversations about it and reiterating that it "is not breaking news."
The U.S. Chamber of Commerce, the leading lobbying group for U.S. businesses, sought to lower the temperature. “U.S. companies have been ambassadors for positive changes to the Chinese economy that continue to benefit both our people,“ Myron Brilliant, the Chamber's executive vice president and head of international affairs, said in a statement. “We do not want to see a further deterioration of U.S.-China relations. We urge the administration and the government of China to return to the negotiating table.“
While China‘s latest latest retaliatory tariffs seem to have especially provoked Trump's fury, they represent “a mild, proportionate response,” to the U.S. decision earlier this month to move forward with more duties, said Agathe Demarais, global forecasting director at The Economist Intelligence unit.
“The recent rise in nationalist, patriotic behavior in China means that it would have been impossible for the Chinese government not to react to the latest US tariffs,” she said.
In the grand scheme of things, tariffs of 5 to 10 percent on $75 billion worth of imports “is not even a rounding error in estimating the impact on the U.S. economy,” added Derek Scissors, a China expert at the American Enterprise Institute who has advised the Trump administration.
But the move is more of a “token action” that signals that Beijing doesn’t see ongoing trade talks between the two countries going anywhere, he said.
The two sides have for more than a year been engaged in talks discussing systemic issues like China’s handling of U.S. intellectual property and other market access and trade issues, including its purchases of American farm goods.
In his later tweets, Trump also singled out shipping companies, writing, "Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE, all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop - it didn’t. Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!"
Trump and his aides have been mostly unyielding in his complaints that Powell and the Fed are to blame for any economic sluggishness, but Powell on Friday singled out the erratic trade directives coming from the White House.
Earlier this week, Trump contended that “we don't have a fed that knows what they're doing,” asserting that if Powell would follow his advice the economy would take off like a “rocket ship.”
Powell vowed that the central bank will “act as appropriate” to sustain a record-breaking period of economic growth following the 2008 financial crisis. But he steered away from providing specifics, calling uncertainty stemming from Trump’s trade policies one of the major factors he was keeping an eye on.
He also cited other geopolitical events like the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government, saying that "long term bond rates around the world have moved down sharply to near post-crisis lows."
But the Fed chief emphasized the novelty of the current trade environment, telling the audience that “fitting trade policy uncertainty into this framework is a new challenge. There are… no recent precedents to guide any policy response to the current situation.”
He continued, “while monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rulebook for international trade. We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives.”