US stocks tumble on Trump’s China tariff plan
The Trump administration announced plans on Thursday to impose tariffs on up to $60bn in annual imports from China, raising fears of a trade war between the world’s two largest economies and sending US stocks sharply lower.
In what the White House billed as a historic move against “economic aggression”, President Donald Trump said his administration had concluded that Beijing had for decades unfairly acquired US intellectual property and needed to pay the price.
The tariffs, Mr Trump said, would “make us a much stronger, richer nation”. They also would help address the US’s $375bn trade deficit with China, he added, calling it “the largest deficit of any country in the history of our world. It is out of control.”
The move to impose 25 per cent tariffs on a list of products due to be unveiled within 15 days marks an escalation of Mr Trump’s campaign to put “America first” through protectionist measures this year.
US equities suffered their biggest falls since February 8, with the benchmark S&P 500 dropping 2.5 per cent and slipping into the red for the year. Among the stocks hit hardest were Caterpillar and Boeing — US companies seen as potential targets in a trade war — which both fell more than 5 per cent.
US companies and business groups, along with Republicans in Congress criticised the tariffs as a misguided tactic to tackle what many see as a valid concern over China’s intellectual property practices.
“Hitting billions in goods with tariffs runs the risk of putting a bigger dent in the pocketbooks of American families across the country,” said Orrin Hatch, the Republican chairman of the Senate finance committee.
Mr Trump turned his fire on China as his administration offered a concession on trade to allies like the EU, Brazil, Argentina, Australia and South Korea.
A senior official on Thursday said they would at least be temporarily exempted from steel and aluminium tariffs announced this month.
China’s ambassador, Cui Tiankai, called the US’s accusations of IP theft “totally groundless” and also warned that Beijing would stand up for itself. “We don’t want a trade war,” he said. “But we are not afraid of it . . . We will certainly fight back and retaliate. If people want to play tough, we will play tough with them and see who will last longer.”
US officials said they would take aim at President Xi Jinping’s strategy to lead the world in high-tech industries, targeting 10 key sectors identified by the Chinese leader in his “Made in China 2025” plan. They include robotics, aerospace, maritime and modern rail equipment, as well as electric vehicles and Biopharma products.
In addition to new tariffs, Mr Trump ordered the US Treasury to come up with a plan to impose new restrictions on Chinese investment in similar sectors within 60 days.
Such a regime would run in parallel with the Committee on Foreign Investment, which examines foreign investments for potential threats to US national security. The committee has taken an increasingly dim view of Chinese acquisitions in recent years.
Robert Lighthizer, US trade representative, said the targeted Chinese products would not include many consumer items and had been chosen via an “algorithm” to minimise harm to US consumers while maximising the impact on China. “We can’t be in a position where China can go out and buy US technology in a variety of ways that are troubling to us,”
Mr Lighthizer told a congressional hearing on Thursday. “These are things that if China dominates, it’s bad for the world.”
In a nod to allies, which want the US to work within the global trading system, Mr Trump is also ordering his officials to launch a case at the World Trade Organization against what Washington claims are China’s biased technology licensing rules.
The Trump administration argues that such rules in effect block many US companies from competing in the Chinese market. Mr Trump has often criticised the WTO but the US has been seeking support from the EU and Japan since last year for actions against China’s intellectual property practices.
Those allies have insisted that any moves should include proceedings at the WTO.
Peter Navarro, the former academic who runs the White House office of trade and manufacturing policy, said the tariffs were part of a new National Security Strategy that the Trump administration presented in December, which labelled China a strategic competitor and cited its “economic aggression” against the US.
The strategy, he said, represented a “seismic shift” from the previous approach of treating China as an economic partner, which dated back to the Nixon administration.
“This is a historic event,” Mr Navarro said. “President Trump should be applauded for his courage and vision on this.”
The administration appeared to take a more deliberate approach in rolling out the new tariffs on China than it did with steel and aluminium tariffs earlier this month, which were roundly criticised by US business groups and Republicans in Congress, partly for the chaotic way in which they were unveiled.
White House officials stressed to reporters that the China move had been the result of strenuous inter-agency deliberations.
Additional reporting by Nicole Bullock in New York