The trade war is heating up: China said Friday it "deeply regrets that it will have to take necessary countermeasures" after the tariff hikes threatened by President Trump kicked in at 12:01am. American and Chinese negotiators met in Washington, DC, Thursday but were unable to reach a deal to prevent tariffs increasing from 10% to 25% on more than $200 billion in products China exports to the US, the Washington Post reports. The White House said that after a "working dinner," chief US negotiator Robert Lighthizer and China's Vice Premier Liu He "agreed to continue discussions." The tariff hike only applies to products that left China after the deadline, which gives negotiators more time to work out a deal.
Trump said Thursday that he had received a "beautiful letter" from China's President Xi Jinping and while a deal is still possible, he is pleased that tariffs are bringing in "billions" of dollars for the government, the New York Times reports. The tariffs, however, are paid by American importers, who pass the costs on to the consumer. "It's going to be a big shock to the economy," Deborah Elms, executive director at the Asian Trade Center, tells the BBC. "Those are all US companies who are suddenly facing a 25% increase in cost, and then you have to remember that the Chinese are going to retaliate." Despite the escalating trade dispute, world markets rose on Friday, with analysts predicting that a deal will be reached. (After a previous round of tariff hikes, China stopped importing American soybeans.)