President Donald Trump on Thursday hit China with tariffs on up to $60 billion of imports to retaliate against the “theft” of American intellectual property, ratcheting up trade tensions between the world’s two largest economies.
The move was swiftly denounced by Beijing, which vowed to “fight to the end” if the United States persisted in the confrontation.
The latest trade action sent stocks diving amid rising fears the United States could provoke a trade war. The Dow Jones Industrial Average plunged more than 700 points.
Saying it would be the “first of many” trade actions, Trump signed the order that also could result in restrictions on Chinese investment in the US.
“We have a tremendous intellectual property theft situation going on,” Trump said as he signed the new trade order, which could include duties as high as 25 percent.
The action did not immediately impose any new tariffs, but US Trade Representative Robert Lighthizer within two weeks is due to publish a list of the products that could be hit with tariffs, which will be followed by a period of public comment.
As Trump has taken progressive steps toward confrontation, Beijing has repeatedly warned that trade wars benefit no one and it will not stand idly by as Washington imposed punitive new measures.
In a strongly-worded statement, China’s Embassy in Washington warned that a confrontation will end up hurting the United States.
“If a trade war were initiated by the US, China would fight to the end to defend its own legitimate interests with all necessary measures.”
The statement said China had shown “sincerity in making reasonable suggestions” and had also made “great efforts” to deal with the current trade imbalance with the United States
Vice President Mike Pence hailed the new measures, saying they made it clear “the era of economic surrender is over.”
Commerce Secretary Wilbur Ross on Thursday suggested the new measures on intellectual property were in fact a way of bringing Beijing to the table, telling CNBC they were “the prelude to a set of negotiations.”
At the same time Washington also said Thursday it would at least temporarily exempt the European Union and six other countries from steep steel and aluminium tariffs announced this month, easing the immediate threat of a trade dispute with close US allies.
Years of ‘failed’ dialogue
Senior White House economic adviser Everett Eissenstat said the new import duties would target industrial sectors where “China has sought to acquire an advantage through the unfair acquisition or forced technology transfer from US companies.”
The order also directs the US Treasury to develop new proposals to increase safeguards on Chinese investments in the US that could compromise national security.
In addition, USTR will go after China in the World Trade Organization — a body Trump and his officials have criticized as ineffective — charging Beijing with preventing US companies from freely licensing their own technology in China.
White House officials said the actions came after years of efforts to failed to convince China to change its behaviour.
“Those dialogues failed under the Bush and Obama administrations,” White House trade adviser Peter Navarro told reporters.
Navarro said Trump also tried to encourage Beijing to open its markets and end unfair practices, inviting President Xi Jinping to the United States and traveling to Asia himself in November.
You just ‘have to protect yourself’
The United States had a record US$337.2 billion trade deficit with China last year.
American industry, and US agriculture in particular, as well as members of the President’s own Republican party have voiced strident opposition to Trump’s recent trade moves.
But Navarro told reporters that China benefitted far more from trade relations with the United States, meaning retaliation could be difficult for Beijing, and that lawmakers would broadly support the new measures.
Influential Republican Senator Lindsey Graham of South Carolina, a Trump ally, said he was “very pleased” with the new measures, but other Republicans called on Trump to be judicious in designing the tariffs, warning of consequences for American consumers.
In testimony before a Senate committee prior to the announcement, Lighthizer said the areas targeted by the new tariffs should be precisely those sectors where Beijing’s economic plan outlines a vision of world dominance.
Those included aerospace and aeronautics equipment, maritime and rail transport equipment, new energy vehicles, agricultural equipment and advanced medical products.
“In some areas, you just have to protect yourself from them so you won’t be in a position where US industry is not wiped out by them,” Lighthizer said.