President Trump posted on Friday morning that an "80% Tariff on China seems right!" ahead of pivotal weekend U.S.-China trade talks to be held by Treasury Secretary Scott Bessent in Switzerland. However, Trump added, he's leaving the decision "Up to Scott B."
S&P 500 futures briefly weakened after Trump's post, which diminished expectations for much relief from current tariff levels that experts say amount to an embargo on most Chinese imports. However, markets appeared mollified by Trump's delegation of authority to Bessent, and the possibility that the administration's private thinking differs from the public messaging.
How Low Will Trump Tariffs Go?
News reports on Thursday from the New York Post and Bloomberg both indicated that Trump tariffs on China could fall below 60% from the current 145% level.
Retailers have warned the White House that the status quo could soon result in empty store shelves as inbound cargo from China plunges. While tariffs around 50%-60% could still produce an inflation shock, that would be more manageable than a freeze in trade.
China exports to the U.S. plunged 21% in April vs. a year earlier, according to official data Friday, with that drop-off hitting U.S. ports now. But overall exports swelled 8.1% in dollar-denominated terms, as Beijing shifted trade to Southeast Asia, Latin America, Europe and Africa.
Trump has raised tariffs on China in multiple steps, starting with a 20% tariff imposed in two steps in February and March for China's role in the fentanyl trade. Then came an additional 34% reciprocal tariff on April 2.
Beijing's quick retaliation for reciprocal tariffs led Trump to pile on another 50% tariff, even as he paused reciprocal tariffs above 10% for the rest of the world. Further back-and-forth retaliatory moves have left the broad U.S. tariff rate at 145% for most Chinese imports, while China's tariff rate on imports from the U.S. stands at 125%.
However, Trump has exempted imports of Apple iPhones and most electronics from all but a 20% tariff. He also provided auto manufacturers with some relief from tariffs based on the North American content of their vehicles.
What Trump Wants In U.S.-China Trade Talks?
Certainly, the U.S. would want Beijing to match any reduction in tariffs, and there's not really any reason for China to resist. However, Bloomberg reported that the Trump administration also wants Beijing to drop its new U.S. export restrictions on rare earth elements, which are used in making fighter jets, missile systems, drones and other defense technology.
It's unclear if China would give ground on rare earths, unless the Trump administration intends to ease Biden-era restrictions on exports of advanced semiconductors and chip equipment to China.
S&P 500
The S&P 500 rose 0.4% Friday morning ahead of weekend U.S.-China trade talks. The S&P 500 added 0.6% on Thursday as Trump announced the first of what will likely be a series of trade deals.
The U.S.-U.K. deal kept Trump's 10% reciprocal tariff in place, but provided some exemptions from 25% tariffs on autos and steel.
Early Friday, Trump posted that "many trade deals" are close.
On Thursday, the S&P 500 ended 7.8% below its Feb. 19 record closing high and up 13.7% from its 52-week closing low on April 8.
The S&P 500, Dow Jones and Nasdaq composite are all slightly below their 200-day moving averages.
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