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Trump Threatens Tariffs on $200 Billion in China Goods, Escalating Fight

Shipping containers stacked in the Kwai Tsing Terminals in Hong Kong.

WASHINGTON — President Trump further escalated his trade fight with China on Monday, saying his administration was prepared to impose tariffs on another $200 billion worth of Chinese goods and potentially even more if Beijing continues to fight back.

Mr. Trump’s threat, in response to retaliatory measures by China, was the latest volley in a dizzying trade dispute that has pitted the world’s two largest economies against each other and resulted in a seemingly endless game of one-upsmanship. The president called it punishment for what he said was an attempt by Beijing to keep the United States “at a permanent and unfair disadvantage.”

“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Mr. Trump said in a statement. “Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong,” he added, calling China’s response “unacceptable.”

The president left little doubt that the United States would continue to hit back even harder if China counters, adding tariffs to another $200 billion worth of Chinese goods. All told, the Trump administration is threatening to impose tariffs on as much as $450 billion worth of goods, including an earlier round — a sum nearly as large as the total value of goods China sent the United States last year, which was $505.6 billion.

“The administration is essentially saying it is willing to bring a substantial amount of commercial activity in the Asia-Pacific to a screeching halt,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies.

The tit for tat began on Friday, when Mr. Trump said Washington would move ahead with tariffs on $50 billion worth of Chinese goods, including agricultural and industrial machinery. The action provoked an immediate response from Beijing, which said it would place its own tariffs on $50 billion worth of American goods, including beef, poultry, tobacco and cars.

On Monday, Mr. Trump raised the ante even further, saying that he had directed Robert E. Lighthizer, the United States trade representative, to pursue another $200 billion worth of tariffs.

China’s Commerce Ministry responded swiftly to Mr. Trump’s threat, issuing a statement on its website that warned that if the Trump administration followed through, China would “have to adopt comprehensive measures combining quantity and quality to make a strong countermeasure.”

[Read about Apple chief executive Tim Cook’s efforts to keep his company from becoming collateral damage in a trade war.]

The rapid succession of trade threats has left little time for negotiations that could potentially defuse tensions between the two countries.

Whether President Xi Jinping of China agrees to bend to Mr. Trump’s demands remains an open question. With his latest move, Mr. Trump has escalated his trade threats to such a level that China can now no longer issue a proportional response. Last year, the United States exported only $130.4 billion of goods to China in total.

But trade experts say there are plenty of ways beyond tariffs that the Chinese government could retaliate — including slowing approvals for acquisitions made by American companies or stalling products at its ports. And Mr. Trump’s aggressive challenges may have left the Chinese president with little room to back down without looking weak to his own population.

“Mr. Trump seems to be counting on the fact that China will soon run out of room to retaliate with its own tariffs on U.S. exports,” said Eswar Prasad, a trade expert at Cornell University. “This could prove to be a miscalculation since China has other effective levers it can use in a trade war, including disruptions of American businesses’ sales operations and their supply chains that run through China.”

The White House imposed the tariffs as punishment for what the administration said was years of unfair trade practices by the Chinese government, including pressuring American companies to hand over valuable trade secrets in order to operate in that country.

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How China Became Trump’s Trade Nemesis

China’s explosive rise was a shock to the global trading system. For decades, Western economies like the United States have struggled with the growth of this economic powerhouse.

“If you look at what’s happening with trade in China, it hasn’t been fair for many, many years.” When President Trump rails against China, he says things like, “Our country is being taken advantage of,” or, “We lost years ago by presidents and others allowing this to happen.” He’s probably referring to the past four decades, when China has grown faster than any major economy in history and gone from a poor, developing country to an economic powerhouse that is challenging America’s spot at the top of the international food chain. “Its emergence as a global power was so sharp and so extreme, faster than the world can handle, in some ways faster than China can handle.” The U.S. and other Western nations kick-started much of China’s rise by opening up trade. What they haven’t figured out is how to get this fundamentally different economic system to play by free market rules. A pivotal moment came in 2001 after 15 years of negotiations. China joined the World Trade Organization, which sets the rules for free and fair trade between member countries. “All of the countries that were in the club at the time put enormous demands on China for what they needed to do.” The Chinese committed to sharply lower tariffs and reduced some of the government’s role in how business gets done. But they argued then, as they still do now, that China is a developing country and so should be held to less stringent free trade standards. The hope was that these first steps would lead to even more sweeping changes. “Why did we assume that? The experience of communism was through the lens of the Soviet Union and its satellite states, which was ultimately not a success. And so the presumption was, China’s going to want to become like us, more market oriented.” “After China joined the W.T.O. in 2001, you saw this enormous surge of Chinese exports to everywhere in the world, and to the United States in particular.” “They were kind of an elephant hiding behind mice with respect to other countries in global trade negotiations at the time.” The U.S. and other countries complained that China was not opening its markets enough, and keeping the value of its currency artificially low to make Chinese exports more attractive. “China has been making great strides using tools that are really not acceptable under the global trade system.” China has continued to operate as a centrally planned economy. The government owns, influences or subsidizes major industries, giving them an artificial competitive edge. There are heavy restrictions on foreign investment, and foreign companies are pressured to share their technologies. “China has become more market oriented, but dating back to probably 2007, 2008, I think it was recognized that China wasn’t on the path to become more like us. And so then countries began to think about, well, what do we do instead?” “Some view the rise of Asia-Pacific with suspicion and fear. America doesn’t.” Enter the Trans-Pacific Partnership, initiated by Bush, signed by Obama. “When implemented, It won’t just boost trade and support jobs in our 12 countries. It will help set stronger rules for trade across the Asia-Pacific.” Put less politely, It was also supposed to be a bulwark to China’s growing economic power. “The idea was that China would want to join this great trading pact, and so they would have this incentive to reform their economy.” “This is the one that President Trump ripped up on his third day in office.” “The first one is withdrawal of the United States from the Trans-Pacific Partnership.” “I had seen the erosion of popular and congressional support for trade for many years. But I’d never seen anything like Donald Trump.” “Our founding fathers understood trade much better than our current politicians, believe me.” Trade is generally accepted by economists as win-win for countries on the whole. But Trump says that China is winning and the U.S. is losing. “He and people in his administration argue that past approaches to dealing with China haven’t worked. It’s not actually that profitable to negotiate with them. We need to focus on this much bigger trade measure, and then we can really hit them with a very aggressive, forceful action.” “He seems intent on generating a moment of crisis.” “We put a $50 billion tariff on, then we put a $100 billion tariff on. And you know at a certain point, they run out of bullets.” But dynamics have changed. Today, China sees its economy as strong enough to withstand almost anything the U.S. can throw at it.

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China’s explosive rise was a shock to the global trading system. For decades, Western economies like the United States have struggled with the growth of this economic powerhouse.CreditCredit...Johannes Eisele/Agence France-Presse — Getty Images

Mr. Trump has been betting that the tariff threats will satisfy his supporters, who cheered his tough-on-China statements on the campaign trail. But China’s retaliation could come back to bite some groups, especially American farmers, who are bearing the brunt of China’s tariffs. And it is generating opposition within his own party among business-friendly Republicans who favor free trade and are increasingly concerned about Mr. Trump’s approach.

Lawmakers of both parties have criticized the president’s trade threats, but few have advocated taking direct action against him. Last week, Senate Republicans blocked a vote on legislation introduced by Senator Bob Corker, a Tennessee Republican, which would have given Congress the ability to overturn certain tariffs. Senate leaders said such a bill would have simply been vetoed by the president.

The trade conflict with China comes as the administration wages several trade conflicts at once. Rather than forming a coalition of countries to pressure China to change its trade practices, as some foreign leaders and trade officials have urged, the president has put allies on edge with tariffs on metal from Europe, Canada and Mexico and threats to withdraw from the North American Free Trade Agreement.

If they do go into effect, the tariffs would greatly increase the disruption for international companies, which are already anxious about the prospect of higher costs on many goods that move between the United States and China.

Kip Eideberg, the vice president of public affairs and advocacy at the Association of Equipment Manufacturers, which represents major American exporters like Caterpillar and John Deere, said the additional tariffs were “terrible news” for his industry.

“It will effectively wipe out all of the gains that our industry has seen from tax reform and regulatory relief,” he said. “We should be creating more jobs, not wiping them out.”

The Trump administration had said it intended its initial list of tariffs on $50 billion of Chinese products to have as little impact as possible on American consumers who purchase Chinese-made televisions, clothes and electronics. But ratcheting up the level of tariffs would eventually start to pinch consumers.

The tariffs could also damage investor confidence, potentially setting off stock market falls or persuading companies to withhold from investing in new facilities and factories. Already there are signs of strains in the global economy from the broader trade tensions, weakness that China and the United States are both better positioned to weather than other nations.

However, there’s a chance Mr. Trump’s tariffs may have a limited impact on China’s nearly $13 trillion economy, which no longer depends as much on exports and can find other places besides the United States to sell its products.

Some American buyers of Chinese goods may simply choose to pay the newly imposed tariffs rather than find new suppliers elsewhere. Brad Setser, a Treasury official in the Obama administration who is now an economist at the Council on Foreign Relations, said that China’s exports to the United States in the listed categories could easily be halved by the tariffs. But they would not disappear entirely, as some Chinese products would still be competitive in terms of cost.

Some of the same goods could probably be sold to other countries at slightly lower prices, further limiting the effect on the Chinese economy, Mr. Setser said. Moreover, China’s exports could grow in other areas to offset any drop.

The tariffs could have a longer-term effect on China, however.

Devised as essentially a pre-emptive strike against China’s enormous program to bolster high-tech industries, the Trump tariffs could limit eventual sales from China’s emerging technologies. With the European Union also protesting the program called Made in China 2025, exports to Europe could suffer, too.

For both sides, the issue has become far more than a struggle over nuts-and-bolts economics. It has become a battle over which country will dominate the high-wage, high-skill industries of tomorrow. Washington and Beijing alike see those industries as essential to protecting national security and to creating jobs.

The Trump administration is pushing hard for curbs on the Made in China 2025 program. Beijing aims to make the country a leader in the manufacturing of advanced products, including computer microchips and commercial aircraft. The Trump administration’s statement announcing tariffs managed to mention the Chinese industrial policy program no fewer than five times.

But China appears just as determined to preserve the program. And the trade issue has become so prominent that the Chinese public has come to expect that Beijing will push back hard against the Trump administration’s trade measures.

“This pressure will be high,” said Tu Xinquan, the director of the China Institute of World Trade Organization Studies in Beijing. “There is no way to move back.”

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