President Donald Trump has threatened to escalate tariffs on Chinese goods from 10 percent to 25 percent in a series of tweets Sunday, May 5 and Monday, May 6. In response, the value of the yuan and crude oil fell, and the Dow Jones Industrial Average plunged 450 points triggered by a global selloff.

“Risks of a full-blown trade war are escalating,” said Chua Hak Bin, a senior economist at Maybank Kim Eng Research in Singapore. “Trump’s threat may backfire as China will not want to negotiate with a gun pointing at their heads.”

In addition to threatening to raise costs on existing tariffs, President Trump threatened to add additional tariffs to $325 billion worth of Chinese goods by Friday, May 10, on the grounds that the trade talks with China are progressing too slowly.

On Monday, President Trump tweeted, “The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!”

The two nations have been locked in a contentious trade war for the past year, and representatives from each nation have met several times to negotiate a trade pact. The negotiations sought to address U.S. concerns over China’s trade surplus, alleged theft of intellectual property, and forced technology transfers.

In December of last year, President Trump and China President Xi Jinping agreed to a tariff truce to allow senior officials time to negotiate. The brief period of truce saw a rally in global stocks that had suffered a period of fluctuation in 2018 as a result of the uncertain trade climate. After the announcement of the truce in December, the stocks began to steadily rise again, reportedly due to the assumption that a deal between the U.S. and China was inevitable. The drop in the Dow on May 6 was the largest drop in stocks since the government shutdown in January.

China’s foreign ministry said that representatives were still planning to travel to the U.S. for the next round of talks, but was unable to confirm if the tweets impact the dates of previously scheduled negotiations. “We are now trying to get more information on the relevant situation,” ministry spokesman Geng Shuang told a briefing in Beijing. “What I can tell you is that the Chinese team is preparing to travel to the U.S. for trade talks.”

President Trump’s tweets mark an abrupt reversal in stance for the White House after both the U.S. and China have been reported for weeks that the trade talks were productive. U.S. Treasury Secretary Steven Mnuchin, who visited Beijing last month along with U.S. Trade Representative Robert Lighthizer, characterized the deal at the time as "getting into the final laps."

Read more about the effects of the ongoing trade war via Bloomberg, the Washington Examiner, or NBC News.

 

-- UPDATE -- Since this post was published, the Office of the United States Trade Representative announced that on May 10, Chinese products under Section 301 will be increased from a 10 percent tariff to a 25 percent tariff.