Trump hits USD50 billion of China goods amid fears of trade war

President Donald Trump took his boldest step to level the economic playing field with China, ordering sweeping tariffs on Chinese goods in a move that could escalate already tense trade relations between the world’s two biggest economies.

The president instructed U.S. Trade Representative Robert Lighthizer to levy tariffs on at least USD50 billion in Chinese imports. Trump signed an executive memo issuing the instructions today [Macau time] at the White House. Within 15 days, USTR will come up with a proposed list of products that will face higher tariffs.

“This has been long in the making,” Trump said, adding that the tariffs could affect as much as $60 billion in goods. “We have a tremendous intellectual property theft situation going on” with China affecting hundreds of billions of dollars in trade each year, he said. As he signed the tariffs order, Trump told reporters, “This is the first of many.”

Trump also directed Treasury Secretary Steven Mnuchin to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the U.S. views as strategic, said senior White House economic adviser Everett Eissenstat.

Policy makers across the world are warning of a brewing trade war that could undermine the broadest global recovery in years. U.S. stocks fell sharply yesterday amid worries that the U.S. action could provoke a stern response from China, with the S&P 500 down 1.1 percent at 12:30 p.m. New York time. Meanwhile, business groups representing companies ranging from Walmart Inc. to Amazon.com Inc. are warning U.S. tariffs could raise prices for consumers and sideswipe stock prices.

Even central banks, which normally stay above the fray of trade spats, are weighing in. “A number of participants reported about their conversations with business leaders around the country and reported that trade policy has become a concern,” Federal Reserve Chairman Jerome Powell said this week, while cautioning that trade issues haven’t changed the Fed’s outlook. The Bank of England warned yesterday that increased protectionism could have a “significant negative impact” on global growth.

The Trump administration is framing the move as a major turning point in U.S.-China relations. It followed a seven-month investigation by USTR into allegations China violates U.S. intellectual property, under the seldom-used section 301 of the 1974 Trade Act. The U.S. concluded China engages in a range of violations, including policies that force American companies to transfer technology and the accessing of trade secrets through hacking, said Eissenstat.

Trump tried to make it clear he wasn’t trying to provoke China. “I view them as a friend. I have tremendous respect for President Xi,” Trump said. But, the U.S.’s trade deficit with China is “the largest deficit in the history of our world,” he said.

The president’s action brought rare praise from Senate Democratic Leader Chuck Schumer, ordinarily a foe of the administration.

The president is “exactly right” to pursue the tariffs, Schumer said. “I want to give him a big pat on the back,” the New York senator added, “I’m very pleased that this administration is taking strong action to get a better deal on China.”

Trump’s actions represent a “seismic shift from an era dating back to Nixon and Kissinger, where we had as a government viewed China in terms of economic engagement,” White House trade adviser Peter Navarro told reporters on Thursday. “That process has failed.”

“The problem is that with the Chinese in this case, talk is not cheap. It has been very expensive for America,” said Navarro. “Finally the president decided that we needed to move forward.”

Before the tariffs become final, there will be a 30-day comment period, the White House said. Trump also directed his officials to pursue a World Trade Organization complaint against China for discriminatory licensing practices. Andrew Mayeda, Toluse Olorunnipa, Bloomberg

Beijing vows to defend its interests

The Chinese government vowed yesterday to take “all necessary measures” to defend the country’s interests if President Donald Trump targets it for allegedly stealing American technology or pressuring U.S. companies to hand it over.

“China will not sit idly to see its legitimate rights damaged and must take all necessary measures to resolutely defend its legitimate rights,” the Commerce Ministry in Beijing said in a statement on its website.

Foreign Ministry spokeswoman Hua Chunying told reporters that Beijing hoped the U.S. would “refrain from taking actions that are detrimental to both sides.”

Dozens of industry groups sent a letter last weekend to Trump warning that “the imposition of sweeping tariffs would trigger a chain reaction of negative consequences for the U.S. economy, provoking retaliation; stifling U.S. agriculture, goods, and services exports; and raising costs for businesses and consumers.”

The announcement will mark the end of a seven-month U.S. investigation into the hardball tactics China has used to challenge U.S. supremacy in technology, including dispatching hackers to steal commercial secrets and demanding that U.S. companies hand over trade secrets in exchange for access to the Chinese market.