The Trump administration on Tuesday raised the stakes in a growing trade showdown with China, targeting 25 per cent tariffs on some 1,300 industrial technology, transport and medical products to try to force changes in Beijing’s intellectual property practices.
The US tariff unveiling, representing about $50 billion of estimated 2018 imports and aimed at dealing a setback to China’s efforts to upgrade its manufacturing base, drew an immediate condemnation from Beijing, along with a threat of retaliatory action. China’s Ministry of Commerce said it “will soon take measure of equal intensity and scale against US goods”.
“We have the confidence and ability to respond to any protectionist measures by the United States,” the ministry said in a statement quoted by the official
The tariff list from the US Trade Representative’s office followed China’s imposition of tariffs on $3 billion worth of US fruits, nuts, pork and wine to protest new US steel and aluminum tariffs imposed last month by US President Donald Trump.
The stand-off between the world’s two largest economies has sparked market fears that they could spiral into a trade war that could crush global growth. Asian share markets were mixed amid trade tension concerns, with Japan’s Nikkei 225 off 0.1 per cent but Shanghai’s main index poised to open 0.3 per cent higher.
Possible price rise
The USTR list ranged from chemicals to light-emitting diodes to machine parts, but US industry groups warned it would still hit supply chains that rely on Chinese components and would ultimately raise costs for consumers.
Many consumer electronics products such as cellphones made by Apple Inc. and laptops made by Dell were excluded, as were footwear and clothing, drawing a sigh of relief from retailers who had feared higher costs for American consumers. But the USTR did include some key consumer products from China, including flat-panel television sets and motor vehicles, both electric and gasoline-powered with engines of 3 liters or less.
A Reuters analysis that compared listed products with 2017 Census Bureau import data showed $3.9 billion in flat-panel television imports, and $1.4 billion in vehicle imports from China.
Among vehicles likely to be hit with tariffs is General Motors Co’s Buick Envision sport-utility vehicle, which is assembled in China and sold in the United States. Volvo, owned by China’s Geely Motors, also exports Chinese-built vehicles to the United States.
More than 200 products on the list saw no US imports last year, including large aircraft and communication satellites, while some categories were highly unlikely to ever be imported, such as artillery weapons.
Publication of the tariff lists starts a public comment and consultation period expected to last around two months, after which USTR said it would issue a “final determination” on the product list. It has scheduled a May 15 public hearing on the tariffs.
China ran a $375 billion goods trade surplus with the United States in 2017, a figure that Trump has demanded be cut by $100 billion.
Limiting damage
USTR developed the tariff targets using a computer algorithm designed to choose products that would inflict maximum pain on Chinese exporters, but limit the damage to US consumers.
A USTR official said the product list got an initial scrub by removing products identified as likely to cause disruptions to the US economy and those that needed to be excluded for legal reasons. “The remaining products were ranked according to the likely impact on US consumers, based on available trade data involving alternative country sources for each product,” the official, who spoke on condition of anonymity, told Reuters .
USTR said the China tariffs announced on Tuesday were proposed “in response to China’s policies that coerce American companies into transferring their technology and intellectual property to domestic Chinese enterprises.” The agency added that such policies “bolster China’s stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans.”
China has denied that its laws require technology transfers and has threatened to retaliate against any US tariffs with trade sanctions of its own, with potential targets such as US soy beans, aircraft or heavy equipment.
Right approach?
A USTR official said the tariff list targeted products that benefit from China’s industrial policies, including the “Made in China 2025” programmeme, which aims to replace advanced technology imports with domestic products and build a dominant position in future industries.
The state-led 2025 programme targets 10 strategic industries: advanced information technology, robotics, aircraft, new energy vehicles, pharmaceuticals, electric power equipment, advanced materials, agricultural machinery, shipbuilding and marine engineering and advanced rail equipment. Many products in those segments appear on the list, including antibiotics and industrial robots and aircraft parts.
US business groups reacted cautiously, saying they agreed with Trump’s efforts to stop the theft of US intellectual property, but questioning whether tariffs were the right approach. “Tariffs are one proposed response, but they are likely to create new challenges in the form of significant added costs for manufacturers and American consumers,” National Association of Manufacturers President Jay Timmons said in a statement.
US Senator Marco Rubio said in a letter to Lighthizer and Treasury Secretary Steven Mnuchin that he was glad to see “bold” action against China. “These necessary actions constitute an important break with the appeasement of previous administrations, and provide an opportunity to chart a new course for Americas relationship with this strategic competitor,” Rubio wrote.