Donald Trump was set to sign a presidential memorandum on Thursday that will give trade officials two weeks to come up with a list of Chinese-made products on which to put tariffs, with the goal of slapping $ 50 billion in punitive damages on a country the U.S. says doesn’t trade fairly.
A little after noon ET in Washington, the U.S. president will sign a document instructing the Treasury Department to look at implementing tariffs on a wide swath of Chinese-made products, under the guise of fighting back against unfair trading practices.
Unlike the move earlier this month to put tariffs on steel and aluminum, Thursday’s memo isn’t expected to come up with a list of products destined to see tariffs. Rather, it gives officials 15 days to come up with a list of products tailored to do $ 50 billion in economic harm to China, while minimizing the impact on American consumers and companies.
Stock markets started reacting even before the news came out, with the Dow Jones Industrial Average off almost 500 points or two per cent, and the technology-heavy Nasdaq off by even more.
The Nasdaq took a heavy hit, because the types of products likely to be targeted could be high tech, heavily represented among its listings. A senior administration official said the list of targeted sectors will borrow heavily from China’s own pronouncements on industries it is aggressively trying to expand in, including aerospace, rail, high tech infrastructure, artificial intelligence, and robotics.
Those are all industries listed in a document called “Made in China 2025,” which the administration says lays out China’s economic strategy moving forward.
“It’s basically China’s blueprint for domination in the industries of the future,” the official said. “These tariffs are designed to compensate the U.S. for the harm that their policies have imposed on America.”
The U.S. alleges that China is an unfair trading partner in that it requires foreign companies to surrender all of their technology to do business in China, and only allows them minority stakes in the Chinese subsidiaries they set up.
China then uses that technology to compete with U.S. companies in China and around the world, the administration alleges. Since 2001, when China joined the World Trade Organization, China’s economy has grown from $ 1 trillion to almost $ 12 trillion, a time when the U.S. economy has comparatively “sputtered,” as the official put it.
U.S. trade officials have already identified a list of 1,300 different product lines that could be hit by tariffs, and will now come up with a list within 15 days. After that, there will be a consultation period on the final list, at which point the tariffs will be implemented.
The United States will also pursue litigation in the World Trade Organization to address what the administration calls China’s discriminatory licensing practices.
The Trump administration is fond of repeating its claim that China has a $ 370 billion trade surplus in goods with the U.S., and cites internal research suggesting that every billion dollars in trade deficit works out to a loss of about 6,000 U.S. jobs. As a result of China’s trade policies, there are today two million more jobs in China than there would otherwise be, and two million fewer in the U.S., the senior White House official said.
The exact nature of the tariffs isn’t known yet, but several influential U.S. groups have already come out against them. The National Retail Federation says it has issues with China’s trade policies, but says tariffs are the wrong way to combat them.
“Holding China accountable for refusing to follow global trading rules is important and necessary, but instead, the tariffs proposed by the administration will punish ordinary Americans for China’s violations,” the group said in a release. “Engaging in a trade war will … result in higher prices for a wide range of consumer products and basic household goods.”
It’s not just higher prices for consumers in the U.S., either. The tariffs are almost certain to incur retaliatory moves in China on a slew of U.S. exports, including agricultural commodities, including soybeans, sorghum and live hogs, said Chris Krueger, a strategist at Washington D.C.-based research firm Cowen Research.
“The only thing harder to predict than Trump’s trade agenda is the Chinese response,” Krueger said, noting that any reaction won’t necessarily be as limited or targeted as the U.S. actions are. For starters, Trump is taking the action under the rarely invoked Section 301 of the Trade Act of 1974, legislation that comes with all sorts of rules and regulations around it.
“China is not bound by these statutes and can get far more creative — and quick — with retaliation,” Krueger said.
Reaction from Beijing has been swift, with China’s Commerce Ministry saying “with regards to the Section 301 investigation, China has expressed its position on many occasions that we resolutely oppose this type of unilateral and protectionist action by the U.S.”
“China will not sit idly by while legitimate rights and interests are hurt. We must take all necessary measures to firmly defend our rights and interests,” the ministry added.
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