White House move raises trade tensions with China

The White House announced Tuesday it will move forward with plans to punish China with hefty tariffs and investment restrictions, steps that ramped up tensions between Washington and Beijing on trade.

The administration said it will impose a 25 percent tariff on $50 billion in Chinese technology imports, and that it will implement limits on investment in U.S. high-technology sectors.

{mosads}The decision builds on the announcement Trump made in March to take several major steps against China to protect U.S. domestic technology and intellectual property from theft.

A full list of Chinese imports to be hit by tariffs will be released by June 15, the White House said. The limits on Chinese investments in the tech sector will come by June 30.

Both will be implemented “shortly afterward,” the White House said. The saber-rattling by Trump comes as the two sides continue talks on trade, and ahead of a weekend visit to China by Commerce Secretary Wilbur Ross.

It also appeared to be in conflict with recent remarks by Treasury Secretary Steven Mnuchin, who said last week that “we are putting the trade war on hold. Right now, we have agreed to put the tariffs on hold while we try to execute the framework.”

Mnuchin’s remarks followed a joint statement by Trump and Chinese President Xi Jinping on May 19 that included vague promises aimed at settling the trade fight. It said China “will significantly increase purchases of United States goods and services.”

Trump has pressed China to reduce its $375 billion trade surplus with the United States.

A spokesperson for China’s Ministry of Commerce said officials were “surprised by the strategic statement released by the White House, but, at the same time, it is somewhat expected.”

It said the steps run “against the consensus reached by the U.S. and China in Washington recently.”

Chad Bown, a senior fellow at the Peterson Institute for International Economics, said the White House’s announcement could complicate Ross’s trip and result in China retaliating by imposing tariffs on $50 billion of U.S. imports.

“At this delicate moment in the talks with China, I think the Trump administration needs to be worried about misunderstandings that might arise by negotiating in public,” he said.

“If today’s statement really is just a procedural move to meet deadlines, then the administration could always simply clarify that with a simple statement to that effect,” Bown said. “Otherwise, Beijing is left to its own devices and might simply interpret today’s statement as indicating that Trump’s tariffs are no longer ‘on hold.’ “

Dean Garfield, president and CEO of the Information Technology Industry Council, said administration officials themselves had said tariffs and countertariffs would ratchet up tensions.

“Instead, the administration should use this time to seek specific commitments on gaining fair and reciprocal access to the Chinese market, and on ending China’s harmful trade practices with accountability mechanisms and timelines for implementation,” said Garfield, whose group represents major tech groups such as Apple and Adobe.

Another trade expert, speaking anonymously to discuss the U.S. strategy candidly, downplayed the latest U.S. threats.

The source noted that there are still no hard implementation dates, and the United States is not bound by the new deadlines. As a result, the steps could give Ross leverage in his negotiations with China.

In another optimistic sign for businesses, the expert said the administration seemed to have backed off a threat to impose an additional $100 billion in tariffs on Chinese imports.

Senate Democratic Leader Charles Schumer (N.Y.), who has occasionally backed Trump’s trade decisions on China, expressed support for the president’s plans.

“The president has the potential to do more to correct China’s unfair trade policies than any president has had but he must be strong, tough and consistent,” Schumer said in a statement.

“While obviously more details are needed, this outline represents the kind of actions we have needed to take for a long time, but the president must stick with it and not bargain it away,” he added.

Alliance for American Manufacturing President Scott Paul said that “punitive tariffs are always a last resort, but if Beijing is unable or unwilling to stop intellectual property theft and other unfair trade practices that cost American workers jobs and American businesses hundreds of billions of dollars every year, tariffs are the best leverage we have.”

U.S. business groups, which are steadfastly opposed to using tariffs as leverage in negotiations, continued to urge Trump to tread lightly and avoid a major confrontation with China.

“The president’s announcement to move forward on imposing the Section 301 tariffs puts American consumers on the hook for the misdeeds of Chinese companies,” said Hun Quach, vice president of international trade for the Retail Industry Leaders Association.

U.S. Chamber of Commerce President and CEO Thomas Donohue said that the decision “is in fact a tax on American consumers and will undermine the competitiveness of American companies, just as the administration’s steel tariffs have dramatically raised prices on steel in the United States.”

Donohue has urged the White House to work with China to open its markets through reforms rather than imposing tariffs.  

The National Retail Federation said it was “disappointed the administration has announced plans to move ahead with tariffs, which will lead to higher costs for consumers, fewer jobs and retaliation.”

“As the U.S. and China prepare for another round of negotiations, we hope the administration has clearly defined objectives and concrete solutions to resolve this trade dispute without tariffs,” said the group’s president and CEO, Matthew Shay.

U.S.-China Business Council President John Frisbie said he would prefer if the U.S. and China put the threat of tariffs on hold while the nations engage in trade talks.

“We need solutions that will put the trade relationship on a sounder path for mutual prosperity, not sanctions that will do more harm than good. We encourage both sides to use the coming weeks to achieve that goal,” Frisbie said.

“Instead, the administration should use this time to seek specific commitments on gaining fair and reciprocal access to the Chinese market, and on ending China’s harmful trade practices with accountability mechanisms and timelines for implementation.”