President Donald Trump recently imposed tariffs on hundreds of Chinese products — from X-ray tubes to incinerators. And Beijing struck back by targeting U.S. soybeans, beef, seafood and other products.
The punch-and-counterpunch announced Friday in Washington and Beijing moved the world’s two largest economies perilously near a trade war that would inflate prices for consumers, disrupt the flow of goods and perhaps slow a global economy that has been enjoying its healthiest expansion in a decade.
“Everybody loses in a trade war,” says Philip Levy, senior fellow at the Chicago Council on Global Affairs and a former White House economic adviser. “You get consumers who are worse off. You get producers who are worse off, farmers who are worse off and you don’t even achieve your goal.”
What’s more, the China tariffs come just as the United States is sparring with close allies like the European Union, Canada and Mexico in a separate conflict over trade in steel and aluminum.
TRUMP THREATENS MORE TARIFFS AGAINST CHINA
President Donald Trump has directed the U.S. Trade Representative to prepare new tariffs on $200 billion in Chinese imports as the two nations move closer to a potential trade war.
The tariffs, which Trump wants set at a 10 percent rate, would be the latest round of punitive measures in an escalating dispute over the large trade imbalance between the two countries. Trump recently ordered tariffs on $50 billion in Chinese goods in retaliation for intellectual property theft. The tariffs were quickly matched by China on U.S. exports, a move that drew the president’s ire.
“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Trump said in a statement Monday announcing the new action. “Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong.”
Trump added: “These tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.”
China’s Commerce Ministry on Tuesday criticized the latest threat of tariffs, saying it was an “act of extreme pressure and blackmail that deviates from the consensus reached by both parties after many negotiations, and is a disappointment to the international community.”
“If the U.S. becomes irrational and issues this list, China will have no choice but to adopt strong countermeasures of the same amount and quality,” the ministry statement said.
Trump said that if China responds to this fresh round of tariffs, then he will move to counter “by pursuing additional tariffs on another $200 billion of goods.”
It wasn’t immediately clear when the new tariffs could be put in place, as the trade office has yet to identify the Chinese goods to be penalized or conduct a legal review. The first round of penalties announced by both nations is set to take effect July 6.
RUSSIA TO SLAM RETALIATORY TARIFFS ON US IMPORTS
Russia on Tuesday announced retaliatory measures in response to the U.S. move to impose tariffs on foreign steel and aluminum.
Economic Development Minister Maxim Oreshkin said a statement that Moscow has decided to apply retaliatory measures in line with the World Trade Organization’s rules to compensate for damage incurred by the U.S. tariffs.
Oreshkin said that additional tariffs will be applied to a range of U.S. imports, but he declined to immediately name them, saying his ministry will release the list in the coming days. He added that the tariffs will be applied to the U.S. goods that have domestic equivalents to avoid hurting the national economy.
Oreshkin later told reporters that tariffs may apply to road construction equipment and some other items, but will not target medicines, according to Russian news agencies.
The European Union, India, China and Russia all have applied to the WTO to challenge the tariffs that took effect March 23. Washington argued they were for national security reasons.
WHAT DID TRUMP DO?
The White House on Friday announced plans to slap 25 percent tariffs on more than 1,100 Chinese products, worth $50 billion a year in imports. The administration had originally proposed the tariffs in April, starting with a list of 1,333 Chinese products lines. After receiving public feedback, it removed 515 from the blacklist and added 284 others.
Starting July 6, the U.S. will tax the 818 products, worth $34 billion a year in imports, that remained from the original list. It won’t target the 284 additions, worth $16 billion, until after it collects public feedback.
HOW IS CHINA RESPONDING?
Beijing immediately said it would retaliate with penalties of the same scale on American goods — and it spelled out details to impose tariffs on 545 U.S. exports, including farm products, autos and seafood.
“The Chinese side doesn’t want to fight a trade war, but facing the shortsightedness of the U.S. side, China has to fight back strongly,” the Chinese Commerce Ministry said in a statement. “We will immediately introduce the same scale and equal taxation measures, and all economic and trade achievements reached by the two sides will be invalidated.”
American soybean farmers, who send about 60 percent of their exports China, are especially worried about Beijing’s retaliation. Soybean prices were already falling before Friday’s announcement.
Prices will likely drop further should the tariffs be imposed,” says Bill Shipley, president of the Iowa Soybean Association. “This will further pressure agricultural families and businesses already struggling with below break-even commodity prices.”
HOW WILL CONSUMERS AND BUSINESSES BE AFFECTED?
Tariffs are a tax. So they drive up the price of targeted imports. The reduced foreign competition means that domestic producers can raise their prices, too.
The Trump administration has sought to protect consumers from a direct impact from the tariffs. The tariffs target mainly Chinese industrial machinery, aerospace parts and communications technology; they spare such consumer goods as smartphones, toys and clothes that Americans purchase by the truckload from China. Televisions and pharmaceuticals were removed from the original tariff list.
Still, these tariffs will impose higher costs on U.S. companies that use the equipment. And over time, those costs could be passed on to consumers. The impact won’t be as visible as it would be if consumer products were taxed directly.
By contrast, the Trump administration earlier this year imposed steep tariffs on imported washing machines. By May, the cost of laundry equipment had jumped 17 percent from two months earlier, according to government data.
WHAT’S THE DISPUTE ABOUT?
The United States accuses China of using predatory tactics in a breakneck effort to supplant American technological supremacy. Among these are outright cyber-theft. Beijing forces U.S. and other foreign companies to hand over technology as a price of admission to the vast Chinese market. And it uses Chinese government money to outbid private companies for U.S. technology at above-market prices.
U.S. officials say they fear that Beijing’s long-range development strategy, dubbed “Made in China 2025,” will hamper competition and hurt American competitors. It calls for creating Chinese global competitors in such areas as information technology, robotics, aerospace equipment, maritime engineering equipment, electric vehicles, biopharmaceuticals and medical devices.
Foreign business groups have complained for a decade that Beijing is squeezing them out of promising economic fields. They say “Made in China 2025” appears to leave them little or no place in those industries.
But it isn’t always clear whether the United States is seeking to curb China’s sharp-elbowed practices or to keep it from emerging as a legitimate rival.
HAVEN’T THE 2 NATIONS TRIED TO WORK THINGS OUT?
Yes. And for a time last month it looked as if they’d reached a truce. After a meeting in Washington, Treasury Secretary Steven Mnuchin declared the trade war “on hold” and the tariffs suspended. Mnuchin said so after China pledged to buy more from the U.S., especially energy and agricultural products and to shrink America’s gaping trade gap with China — $336 billion last year. But critics dismissed that agreement as vague. And Trump backed away and returned to the tariff threat.
Erin Ennis of the U.S.-China Business Council says she suspects Beijing will wait to see whether the United States actually puts the U.S. tariffs into effect July 6 before it starts taxing U.S. goods. That could buy time for last-ditch negotiations.
ISN’T THE U.S. TIED UP IN OTHER TRADE DISPUTES?
Oh, yes. Trump just enraged the EU, Canada and Mexico by imposing tariffs on imported steel and aluminum. Worse, he argued that the imported metals posed a threat to U.S. national security — an insult to the longstanding American allies that they roundly rejected. He has also threatened to tax auto imports, also on national security grounds.
Critics say Trump’s decision to pick fights with America’s friends weakens his hand against China.
Trade analysts say it would be wiser for the United States to enlist its allies to challenge China’s drive to grab technology, rather than go it alone with unilateral tariffs. After all, companies from the advanced economies of the U.S., Europe and Japan share the same gripes.
China is adept at playing countries and companies off against one another, Jennifer Hillman, a Georgetown University law professor, testified last week before the U.S.-China Economic and Security Commission. If one complains, China can lock it out of the market and do business with a more compliant competitor. Better to present a united front.
AP Writers Christopher Rugaber in Washington, Alexandra Olson in New York and Joe McDonald in Beijing and video journalist Teresa Crawford in Chicago contributed to this report.