BREAKING NEWS: Trump Hits China With New Tariffs - Global Trade Magazine
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  March 22nd, 2018 | Written by

BREAKING NEWS: Trump Hits China With New Tariffs

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  • Trump’s tariffs are likely to trigger retaliation from Beijing.
  • New tariffs target China's high-tech sector and Chinese investments in the US.
  • Presidential action is counter to China's efforts to pressure US companies to transfer intellectual property.

President Donald Trump has announced the US will impose tariffs on Chinese imports in a move to curb the appropriation of US technology. The announcement is likely to trigger retaliation from Beijing and the possibility of an escalation into a trade war.

The tariffs are likely target China’s high-tech sector and also includes restrictions on Chinese high-tech investments in the United States. Apparel and footwear imports could also be hit. The president directed the United States Trade Representative to propose a list of targeted products within the next 15 days.

The presidential action is based on the USTR’s Section 301 investigation into China’s efforts to pressure US companies to transfer intellectual property as a condition for market access.

In announcing the tariff, Trump described the measure as part of an effort to reduce the US trade deficit with China.

Section 301 of the Trade Act of 1974 authorizes the president to impose trade restrictions on foreign engaging in unfair trade practices, such as violations of trade agreements or other practices that denies rights to US businesses. The legislation contemplates, and the rules of the World Trade Organization require, that the US government secure approval under the WTO Dispute Settlement Mechanism before enforcing an action against another WTO member if the Section 301 action is based on the violation of WTO rules. USTR Robert Lighthizer said the tariff measure will also involve filing a case with the WTO.

Lighthizer told the House of Representatives Ways and Means Committee earlier this week that the president would aim to minimize the impact of tariffs on US consumers. Given the scope of the tariffs, it’s hard to see how that would be possible, and US retailers have urged the president not to impose tariffs on apparel and footwear.

It’s expected that China will hit back with measures against US agricultural exports, such as soybeans, a move that could escalate the situation into a trade war. Lighthizer told Congress that “nobody wins from a trade war,” a position that puts him at odds with the president who tweeted not too long ago that trade wars are “good and easy to win”.

China’s Ministry of Commerce termed the Trump tariffs “detrimental to both sides,” and said in a statement on its website that the country will take “all necessary measures” to defend its interests.

The Chinese signaled they are willing to engage with the US on trade, with Premier Li Keqiang quoted as saying his country would further open its economy, would not compel foreign companies to transfer technology, and would lower tariffs and taxes.

An analysis by Oxford Economics indicated a 25-percent US tariff on $60 billion worth of Chinese exports, with comparable retaliation, would reduce China’s growth by about 0.1 percent this year, with a smaller impact on the US economy. The bugger risk is a series of tit-for-tat responses that could lead to a trade.

US retailers told Trump the tariffs are a bad idea—even though they want the US to be firmer on Chinese IP practices. “We’ve been seeking intellectual property protections,” said Matt Priest, president and CEO of the Footwear Distributors and Retailers of America (FDRA), in a letter to the president. “Now we’re hearing that the remedy for our concerns is to tax those very companies that were looking for additional engagement with China on IP protection.

“It’s very ironic that you would tax American consumers,” he added. Those taxes will do nothing to alter Chinese intellectual property law whatsoever.”

Tariffs against China are going to raise prices for American consumers, the groups warned. Over 97 percent of shoes and clothes sold in the US are imported, with China being the biggest supplier. The US imports about 1.7 billion pairs of shoes each year—over 70 percent of the shoes sold in the US.

In another letter to the president, 25 of the largest brands in US retail—including Walmart, Target, Kohl’s, Levi’s, and Macy’s—said tariffs on Chinese imports “would hurt American households with higher prices. Given the price sensitivity of our products, any additional increases in our costs would strike right at the heart of our ability to keep product competitively priced for our consumers.”

Within hours of Trump’s announcement, China’s Commerce Ministry announced tariffs on $3 billion of imports from the United States. Products affected included fresh fruit, wine, pork, and aluminum.


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