[CTC] U.S. and China announce new tariffs in escalation of trade war

[Arthur Stamoulis]

https://www.washingtonpost.com/business/economy/trump-imposes-import-taxes-on-chinese-goods-and-warns-of-additional-tariffs/2018/06/15/da909ecc-7092-11e8-bf86-a2351b5ece99_story.html?utm_term=.662a77d2b434 <https://www.washingtonpost.com/business/economy/trump-imposes-import-taxes-on-chinese-goods-and-warns-of-additional-tariffs/2018/06/15/da909ecc-7092-11e8-bf86-a2351b5ece99_story.html?utm_term=.662a77d2b434>

U.S. and China announce new tariffs in escalation of trade war
 
By David J. Lynch and Emily Rauhala  
 
June 15, 2018
 
President Trump followed through Friday on his threat to crack down on China for its “very unfair” trade practices, imposing a 25 percent tariff on $50 billion in Chinese imports.
 
Beijing quickly responded. In a late-night statement, China’s Ministry of Commerce said it would impose trade barriers of the “same scale and the same strength.”
 
The Chinese government said Trump’s tariffs were “damaging” relations and “undermining the world trade order.”
 
U.S. and Chinese officials in recent weeks had made progress on a deal that involved up to $70 billion in additional purchases of American products. But the Chinese offer was now “invalid,” the statement said.
 
Chinese officials, who had signaled their intention to retaliate if Trump went through with his tariff threats, are targeting the president’s supporters in farm states and the industrial Midwest.
 
Anticipating the Chinese response, the president said the United States would “pursue additional tariffs,” raising the specter of the tit-for-tat trade war that business leaders and many congressional Republicans fear.
 
 
In a short White House statement, the president said the import tax would apply to “goods from China that contain industrially significant technologies.”
 
Friday’s action follows an administration report in March that complained China had forced foreign companies to surrender their technology secrets in return for market access and had pilfered other advanced U.S. technologies through a campaign of cybertheft and investment in Silicon Valley start-ups.
 
“These practices . . . harm our economic and national security and deepen our already massive trade imbalance with China,” Trump said.
 
The United States last year ran up a $375 billion deficit in goods trade with China, a figure the president blames on Chinese trade barriers. Most economists say the gap is the result of broader forces such as Americans’ low savings rate.
 
On April 6, the administration published a proposed list of 1,333 products targeted for tariffs. After hearing objections from business groups, U.S. Trade Representative Robert E. Lighthizer dropped 515 items and added 284 new ones.
 
 
As a result, the tariffs will be imposed in two steps. On July 6, customs officers will begin collecting the tax on an initial basket of goods valued at $34 billion, which were on the initial list. The Office of the U.S. Trade Representative (USTR), meanwhile, will field comments on the new items on the list, valued at $16 billion.
 
“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.
 
USTR also plans to establish a process for U.S. companies to request permission to continue importing the targeted items on a duty-free basis, if no alternative suppliers exist.
 
The Chinese government is pursuing a $300 billion program of subsidies to enable its companies to dominate next-generation technologies such as artificial intelligence, robotics and quantum computing, upping the stakes for Trump’s efforts to preserve U.S. technological secrets.
 
China has a history of targeting industries such as steel or solar energy for growth, which results in excessive investment by its state-led firms. That, in turn, swamps global markets, driving prices to unsustainable levels and making it all but impossible for private companies to compete, a senior administration official said.
 
 
Unless the United States can somehow force China to change its industrial policies, American companies will lose out in a range of advanced technology markets, the official said.
 
“This is not market capitalism,” the official said, speaking anonymously to brief reporters. “These are state policies where they are targeting certain industries.”
 
Trump’s complaints about China’s trade practices are shared by many business leaders. But there is little support for using import taxes, which are paid by Americans, as a tool against the Chinese.
 
“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 Tom Donohue, president and chief executive of the U.S. Chamber of Commerce.
 
The U.S. announcement comes at a complex juncture in U.S.-China relations.
 
Following a summit in Singapore between Trump and North Korean leader Kim Jong Un, Secretary of State Mike Pompeo stopped in Beijing for meetings with President Xi Jinping and other top Chinese leaders.
 
 
On Thursday, Pompeo thanked Xi for China’s help with North Korea and even wished the Chinese president a happy birthday.
 
But at a news conference with China’s foreign minister, Wang Yi, tension over trade was clear. Pompeo said the U.S. trade deficit with China is still too high, and Wang called for Washington to make a “wise choice” on tariffs.
 
After Trump’s statement Friday, Lu Xiang, a trade expert at the Chinese Academy of Sciences in Beijing, warned that relations between the two countries were heading to their lowest point since China began its economic reforms in the late 1970s.
 
“This is like holding up a pistol, putting the finger on the trigger,” he said of Trump’s actions. “It’s just one step away from pulling the trigger and firing the pistol. It’s a very dangerous and sensitive moment now.”
 
Rauhala reported from Beijing. Luna Lin in Beijing contributed to this report.
 

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