Trump Escalates Trade War With Tariffs on Additional US$200 Billion of Chinese Goods

US President Donald Trump has directed US Trade Representative Robert Lighthizer to initiate the process of levying 10% tariffs on Chinese imports valued at US$200 billion annually.

The long list of items that may be subject to tariffs include certain types of fish and other seafood, meat, vegetables, fruits, rice and other cereals, tobacco, minerals, chemicals, paints, housing materials and items of clothing, fabrics and leather goods.

“For over a year, the Trump Administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition,” said Lighthizer in a July 10 statement. “We have been very clear and detailed regarding the specific changes China should undertake.  Unfortunately, China has not changed its behavior – behavior that puts the future of the US economy at risk.”

“Although I have supported the administration’s targeted efforts to combat China’s technology transfer regime, tonight’s announcement appears reckless and is not a targeted approach”

Significant escalation

The US trade representative directly tied the proposed tariffs to China’s imposition of tariffs on US$34 billion in US exports to China on July 6, in retaliation for America’s imposition of tariffs on Chinese exports to the US on goods with the same value.

Lighthizer reiterated that the tariffs “will eventually cover up to US$50 billion in Chinese imports as legal processes conclude.” China has vowed to impose tariffs up to that same amount as well.

“This is an appropriate response under the authority of Section 301 to obtain the elimination of China’s harmful industrial policies,” Lighthizer said of the proposed tariffs on US$200 billion of Chinese goods. “USTR will proceed with a transparent and comprehensive public notice and comment process prior to the imposition of final tariffs, as we have for previous tariffs.”

Trump has said he would consider tariffs on more than US$500 billion of Chinese exports to the US if Beijing retaliates against the US action, which China has done. The US imported goods valued at US$505.6 billion in 2017.

Chinese response

In a measured statement, China’s Ministry of Commerce called Trump’s move as totally unacceptable. “The Chinese government as always will have no choice but to take the necessary countermeasures,” it said. American exports to China totaled only US$130 billion last year, so the Chinese will have to look beyond tariffs in crafting those countermeasures.

If anything, the response of Trump’s own allies against the president’s decision was more negative. “Although I have supported the administration’s targeted efforts to combat China’s technology transfer regime, tonight’s announcement appears reckless and is not a targeted approach,” complained Republican Sen. Orrin Hatch, chair of the Senate finance committee.

“We cannot turn a blind eye to China’s mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy.”

"It’s clear the escalating trade dispute with China will go one of two ways: a long, multi-year trade war between the two largest economies in the world that engulfs more and more of the globe, or a deliberate decision by President Trump and President Xi to meet and begin crafting an agreement"

Call for talks

Another Republican, Texas congressman Kevin Brady, who leads the House Ways and Means Committee, called on both sides to resume serious trade talks.

“With this announcement, it’s clear the escalating trade dispute with China will go one of two ways,” he said. “A long, multi-year trade war between the two largest economies in the world that engulfs more and more of the globe, or a deliberate decision by President Trump and President Xi to meet and begin crafting an agreement that levels the playing field between China and the US for local farmers, workers and businesses.”

The last trade talks between China and the US took place in Beijing in June, and US Commerce Secretary Wilbur Ross returned home with nothing much to report. The US side said at that time that “the delegations will now report back to receive guidance on the path forward.”

It seems the guidance from Trump is to escalate the trade war, rather than negotiate an end to it.