Trump makes China tariffs official

Trump makes China tariffs official

Security guards walk in front of containers at the Yangshan Deep Water Port in Shanghai. (Reuters Photo)
Security guards walk in front of containers at the Yangshan Deep Water Port in Shanghai. (Reuters Photo)

WASHINGTON: President Donald Trump has moved the United States to the brink of a trade war with China, formally announcing tariffs on billions of dollars worth of Chinese imports that America’s biggest trading partner vowed to retaliate against.

The immediate response from China on Friday signalled a rapid escalation of the dispute. 

The 25% tariffs will take effect from July 6 on $34 billion worth of Chinese goods, the office of the US Trade Representative (USTR) announced on Friday.

It said the tariffs would be applied in two stges: an initial slimmed-down list of 818 product lines worth $34 billion, followed by a second list of products that have largely benefited from industrial policies including the "Made in China 2025" technology development programme. The second group, still under review, is said to be worth about $16 billion.

Beijing intends to impose tariffs with "equal scale, equal intensity" on imports from the US and any consensus the two sides reached earlier would lose effect, the Commerce Ministry said in a statement on its website late Friday.

In an emailed statement, Trump pledged additional tariffs if China follows through on the retaliation threats.

The USTR said the Chinese goods facing tariffs included robotics and aerospace equipment, industrial machinery and automobiles. Not included are consumer goods including mobile phones and televisions.

“The United States can no longer tolerate losing our technology and intellectual property through unfair economic practices,” Trump said.

Stocks on Wall Street were set to open sharply lower on Friday after the announcement, as criticism from the American business community came swiftly.

“Imposing tariffs places the cost of China’s unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers, and ranchers. This is not the right approach,” said Thomas Donohue, president of the US Chamber of Commerce.

"If you end up with a tariff battle, you will end up with price inflation, and you could end up with consumer debt. Those are all historic ingredients for an economic slowdown," said Gary Cohn, Trump's former top economic adviser.

China, the world’s second-largest economy, has pledged to retaliate against US exports including soybeans and pork. The US imported $505 billion worth of goods from China last year and exported about $130 billion, leaving a 2017 deficit of $376 billion, according to government figures.

Trump has frequently cited such an imbalance as the justification for a punitive trade policy toward China, Canada, Mexico, the European Union and other trading partners.

“These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs,” the president said in his statement Friday.

“In addition, they will serve as an initial step toward bringing balance to the trade relationship between the United States and China.”

The move is a response to a USTR investigation earlier this year that accused China of stealing US intellectual property in an effort to dominate the development of advanced technology.

Trump is shaking up the world economic order with his zeal for tariffs and embrace of trade conflict. He threw a meeting of the G7 into turmoil last weekend by revoking support for a joint statement and berating the summit’s host, Canadian Prime Minister Justin Trudeau.

So far, the US has imposed tariffs on steel and aluminium imports. Economists expect the direct impact on the US economy to be modest. But if the president follows through on all the duties he’s threatened, including the tariffs against China, US inflation could accelerate by 15 basis points, according to Goldman Sachs.

Trump’s tariffs may also influence his efforts to bring peace to the Korean peninsula. Beijing is an important player in talks with North Korea on abandoning its nuclear-weapons programme.

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