China Issues Retaliatory Tariffs as Trade Fight Heats Up

China Issues Retaliatory Tariffs as Trade Fight Heats Up

15/06/2018 16:39 - Move comes after White House imposed tariffs on $50 billion of Chinese goods
Bob Davis in Washington and Lingling Wei in Beijing
 

Beijing retaliated against planned U.S. tariffs on Chinese goods by targeting high-value American exports—including farm products, cars, and crude oil—stepping up the potential for a trade war between the world’s two biggest economies.

Shortly after the Trump administration unveiled plans Friday to impose tariffs of 25% on $50 billion in Chinese products, China’s State Council announced it would levy penalties of the same rate on the U.S. goods of the same value.

The U.S. is “provoking the trade war,” China’s Foreign Ministry spokesman Lu Kang said Friday, while pledging to defend the country’s interests.

In striking back at the U.S. action, China expanded the list of U.S. products that would be subject to tariffs to 659 types of goods, from some 106 types it originally disclosed in April. Most of the added goods on China’s retaliatory list are agricultural, seafood and energy products. President Donald Trump said earlier Friday that the U.S. will respond with more tariffs if China retaliates.

Beijing is imposing the tariffs in two steps as Washington is doing—picking the same amounts and same dates the U.S. is choosing. On July 6, China will levy duties on $34 billion of U.S. products, covering 545 categories ranging from soybeans, pork, chicken, seafood to sport-utility vehicles and electric vehicles. The farm goods were chosen to hit U.S. states that supported Mr. Trump, according to people with knowledge of Beijing’s plan.

Then China plans to implement tariffs on additional $16 billion of U.S. goods, the State Council said. The start date for those products, including chemicals, coal, crude oil and medical devices, will be announced later, the council said. Commercial jets, airplane engines and other aviation equipment were left off the list.

Mr. Trump, in a statement earlier on Friday, said any Chinese retaliation would be met with new tariffs. He already has threatened additional tariffs on $100 billion in Chinese imports, but the U.S. hasn’t yet detailed which products would be hit.

“The trade war was started many years ago” by China and others, Mr. Trump said at the White House on Friday. He said the U.S. economy is already humming and “after we do our trade deals, wait til you see our numbers.”

The U.S. tariffs on Chinese goods come after others the Trump administration imposed on metals imports from allies in Europe, Mexico, Canada and Japan. This puts Washington at the center of a mounting trade confrontation, as Mr. Trump tries to put into effect his “America First” trade policy.

Caught in the middle are a number of big U.S. companies, which complain that the tariffs penalize them for their globe-spanning supply chains. The U.S. added semiconductors to its tariff list, for instance. Chips are often designed and produced in the U.S., sent to China for packaging or testing and then returned to the U.S. The chips would now be subject to tariffs on the return trip.

“Tariffs on semiconductors would harm, not help, U.S. semiconductor companies, their workers, and American consumers,” said a spokesman for the Semiconductor Industry Association.

Administration officials said the goal of the tariff fight is to protect high-tech U.S. companies from pressure they face in China to transfer their technology to Chinese partners. Tariffs are necessary, the officials say, to force Beijing to change the way it does business.

If tariffs prompt American technology companies to move manufacturing out of China, that is also a plus, U.S. officials say. Some of that production may return to the U.S. Even if it doesn’t, they argue, the U.S. would benefit if companies move assembly work to other low-wage nations because that would make it harder for Beijing to capture U.S. technology.

“We’re going to stop, we hope, their transfer of technology—their forced transfer of technology,” U.S. Trade Representative Robert Lighthizer said on Fox Business Network.

On July 6, the U.S. will levy tariffs on $34 billion worth of Chinese imports, covering 818 product categories. That is a pared-down version of a preliminary tariff list announced in early April, reflecting input from U.S. industry on which products should be excluded.

Knocked off the initial list were products such as flat-screen televisions, copying machines and air-conditioning parts, according to an analysis by Chad Bown, a trade expert at the Peterson Institute for International Economics.

The American Apparel and Footwear Association said it was pleased that machinery used to make clothing and shoes was removed from the tariff list. But association said, “any new tariffs present an immense burden for the American people.”

The U.S. trade representative’s office added tariffs on imports of $16 billion of Chinese goods in 284 product categories. The products included semiconductors, machinery and plastics.

The administration said it aimed to hobble China’s plans to develop advanced technology under its “Made in China 2025” report, released in 2015. The report is a blueprint for making China a world leader in a number of technology areas, including robotics, semiconductors and electric vehicles.

Before tariffs are assessed on those goods, the trade representative plans to get industry comment at a public hearing on July 24. In addition, companies can ask that certain products be excluded from tariffs if they can’t get those goods from suppliers outside of China.

“Anybody in the U.S. who is affected by these [tariff] lines will have opportunity to come and make their pitch,” said a senior administration official.

In addition to tariffs, the Trump administration is planning to restrict Chinese investment in the U.S. unless China eases up its roadblocks to American investment in China. The Treasury Department is scheduled to release a proposal for limits on Chinese investment on June 30. Now foreign investments are subject to review on national-security grounds by the interagency Committee on Foreign Investment in the U.S. The Treasury plan will have “a broader definition of national security,” Mr. Lighthizer said.

The trade offensive was panned by many U.S. industries. They say they recognize the problems in doing business in China, but oppose tariffs.

The National Association of Manufacturers said “tariffs will cause more problems than they solve” and urged the administration to negotiate a bilateral trade deal with China instead. The Motor and Equipment Manufacturers Association, an auto parts group, said Chinese retaliatory tariffs “could negate” the gains to the U.S. economy from recent tax cuts.

On Capitol Hill, the response depended as much on whether lawmakers were longtime free traders as on their party affiliation. House Ways and Means Committee Chairman Kevin Brady, a Texas Republican, said he was worried that tariffs would “make it more difficult to sell more ‘Made in America’ products globally and expose many of our industries—particularly agriculture and chemicals—to devastating retaliation” from China.

The top Democrat on his committee, Richard Neal of Massachusetts said that tariffs “can be an important tool in re-setting the U.S.-China trade and economic dynamic.” But he said the administration needed to produce a more coherent overall strategy toward China.

Earlier this month China offered to purchase nearly $70 billion of U.S. agricultural, energy and other products if the U.S. called off its tariff threat. That wasn’t enough to persuade Mr. Trump to change course on tariffs.

—Vivian Salama contributed to this article.

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