The order was the largest move yet in Trump’s rapidly unfolding effort to use tariffs — taxes on imported goods — to counter what he sees as unfair trade practices by other countries. It aimed to stop what U.S. officials describe as a years-long effort by China to steal American technology.
The move came on the same day that administration officials announced a significant scaling back of another major trade initiative — Trump’s announcement two weeks ago of tariffs against imported steel and aluminum. Officials announced that countries responsible for more than half of U.S. steel imports and a similar share of aluminum would be exempted, more tightly focusing that weapon on China as well.
“We’re in the midst of a very large negotiation” with the Chinese, Trump said in announcing the new tariffs at the White House, implying he would consider modifying the tariffs if China responds. “We’ll see where it takes us.”
By late in Thursday’s trading session in New York, market indexes were down by nearly 3%, largely on fears of a brewing trade war.
The new tariffs are designed to raise prices on Chinese products from clothing to laptop computers to toys. Officials who briefed reporters in advance said the list of more than 1,000 products subject to the new tariffs will be made final after a period for public comment, probably later this spring.
Trump also will direct the Treasury Department to come up with new restrictions on Chinese investment in the U.S., beyond the rules that currently limit foreign purchases of U.S. companies and assets.
White House trade advisor Peter Navarro, a longtime critic of Chinese practices, called Trump’s move a “historic event” that is part of a “seismic shift” by the administration away from decades of U.S. policies that sought to draw China further into the international economic order.
China seeks “domination of the industries of the future” and has used “discriminatory, unreasonable practices” to force U.S. companies to help it achieve that goal, Navarro told reporters in advance of Trump’s announcement.
The U.S. has “repeatedly aired its concerns” about those practices, but “those dialogues failed under the Bush and Obama administrations,” he said. Faced with a pattern of Chinese actions that he estimated had cost the U.S. at least 2 million jobs, Trump decided to act, Navarro said.
Although Trump’s statement, emphasizing negotiations, held out the possibility of resolving trade disputes with China, Beijing already has plans to retaliate and almost certainly will do so. U.S. agricultural exports, notably soybeans and hogs, are likely to be early targets, raising worries among Trump supporters in farm states of the Midwest and Great Plains.
China could also hit major U.S. companies such as Apple, Ford and Boeing. China plans to buy about $1 trillion of Boeing’s aircraft over the next two decades, the company has said.
A fight with China over trade could also complicate Trump’s negotiations with North Korea over its nuclear program, a subject on which he wants Beijing’s help.
Hua Chunying, a Chinese Foreign Ministry spokeswoman, emphasized Wednesday that both the U.S. and China have benefited from economic ties, particularly American consumers. China does not want a trade war, she told reporters, “but if our hands are forced, we will not … recoil from it. … [W]e will definitely take firm and necessary countermeasures to safeguard our legitimate interests.”
China “has launched a multifaceted effort to prepare for what looks like an imminent trade war,” the state-run Global Times tabloid said on Wednesday, adding that Chinese officials have been meeting with foreign governments “in a bid to form a multilateral response” to the tariffs.
The timing of Trump’s move in part marks a calculation that with the U.S. economy at its healthiest point in a decade, the country is in good position to handle whatever disruptions a potential trade war with China might bring.
It also reflects the rising influence in the administration of trade hawks, notably Navarro. Supporters of free trade have been in retreat within the administration after Gary Cohn resigned from his post as Trump’s chief economic adviser after losing an internal battle over the tariff policy.
The open confrontation between the U.S. and China shows the effect of Trump’s trademark bluster and his scorn for the caution of his predecessors.
But the shift to a more aggressive policy also reflects growing disenchantment with China among U.S. policymakers of both parties as well as influential business leaders.
Senate Democratic Leader Charles E. Schumer of New York, for example, praised the president Thursday morning in a Senate floor speech.
“Today he is doing the right thing,” Schumer said, accusing China of “rapaciously” taking advantage of the United States. “They steal it,” he said, referring to U.S. intellectual property, “and we do nothing.”
A leading Republican, House Ways and Means Committee chair Kevin Brady of Texas, offered more nuanced praise.
“President Trump is right to take a hard line against China’s dishonest trade practices, which have clearly harmed American workers,” Brady said in a statement. “The challenge for every president, however, is how to punish China without harming our families, businesses, and farmers. Tariffs are taxes, so the next 30 days of input are crucial to make sure we don’t punish American workers and families for China’s misbehavior.”
Pressure from Brady and other Republican congressional leaders, business groups and U.S. allies helped cause the administration to scale back the tariffs on imported metals that Trump had announced.
On Thursday, U.S. Trade Representative Robert Lighthizer told Congress that the European Union members, as well as Argentina, Australia, Brazil and South Korea would be exempt from the metals tariffs. Trump had previously announced that Canada and Mexico would be exempted. In addition, the administration plans to grant exemptions for some industries that buy types of steel that aren’t produced domestically.
Action against China has more political support because of a long history of disappointments. When China fully entered the international trading system, becoming a member of the World Trade Organization at the end of 2001, leaders in both parties predicted that joining would mark the first step on a path that would lead China to greater wealth, but also make it less threatening to the rest of the world.
The man who would succeed him in the Oval Office, then-Gov. George W. Bush of Texas, called the move a step toward a “stronger American economy, as well as more opportunity for liberty and freedom in China.”
Eighteen years later, that bright promise has faded.
China has benefited hugely — its national income per capita has grown ninefold since 2000, according to the World Bank.
But that growth came at a much higher cost to U.S. jobs than backers of trade liberalization had predicted. Moreover, the bold predictions of “reform” and “liberty” in China have largely proved wrong.
U.S. politicians of both parties have grown increasingly worried about Chinese efforts to get hold of American technology — by forcing U.S. companies to share innovations as a price of doing business in China or, in many cases, by industrial espionage, cyberattacks and other crimes.
So too have many business leaders.
“China’s theft of American intellectual property and their use of unfair trade practices represent clear threats to manufacturers’ competitiveness and the jobs of American manufacturing workers,” the National Assn. of Manufacturers said in a statement.
But, the group warned, tariffs “are likely to create new challenges in the form of significant added costs for manufacturers and American consumers. In addition to these challenges, tariffs also run the risk of provoking China to take further destructive actions against American manufacturing workers.”
The U.S.-China Business Council, which represents American companies that do business in China, similarly said in a statement that “China’s technology transfer practices and protection of intellectual property need to be addressed and improved.” But the group’s president, John Frisbie, added that “American business wants to see solutions to these problems, not just sanctions such as unilateral tariffs that may do more harm than good.”
Last summer, the Trump administration began an investigation of China’s actions, known as a Section 301 inquiry for the U.S. trade law that gives the president power to retaliate against certain unfair trade practices.
The “very extensive” investigation found strong evidence that China has violated its trade agreements and engaged in a pattern of unfair trade practices, Everett Eissenstat, the deputy director of the White House’s National Economic Council, told reporters.
The investigation found that the Chinese government has hacked U.S. computer systems to benefit Chinese companies, routinely pressured U.S. companies to enter into joint ventures with Chinese partners that required sharing valuable technology, and used state funds to purchase U.S. companies to get their patents and other intellectual property.
In addition, U.S. companies don’t have the same ability to license intellectual property in China that Chinese companies have, he said.
The record “clearly demonstrates that there are unfair practices by China,” Eissenstat said.
But administration critics say Trump’s “America first” rhetoric and his flouting of long-standing U.S. policies in other areas have hurt the international alliances that might have helped the U.S. in a fight with China.
Moreover, the new tariffs do come with some domestic political risk for the president, and China will probably use its retaliatory actions to target those pressure points.
Already on Wednesday, in advance of Trump’s decision, members of Congress were expressing concerns about the impact on their home state industries.
When Lighthizer appeared before the House Ways and Means Committee, Republicans from Ohio, Nebraska and Kansas hit him with questions about possible Chinese efforts to restrict U.S. exports of soybeans, hogs and other agricultural products.
Chinese officials already have suggested that they can buy less of those commodities from the U.S. and more from other suppliers, such as Brazil.
Others raised questions about the effect on retailers or on low-income families if the prices of imported Chinese shoes and clothing go up.
Lighthizer conceded that retaliation was likely, but insisted that the concerns were not “a sufficient worry that you’re going to say, therefore, we’re not going to stick up for U.S. intellectual property.”
“We can’t have a $375-billion trade deficit and not do anything to defend ourselves,” he said.
Lauter reported from Washington and Kaiman from Beijing.
Courtesy: Los Angeles Times