Donald Trump hits China with new tariffs on US$200 billion of imports, escalating trade war again


US President Donald Trump announced a new batch of tariffs on imports of Chinese products to the US on Monday, significantly widening the scope of a trade war that American companies are fighting to contain and Beijing has vowed to continue retaliating against.

Tariffs of 10 per cent will apply to imports worth US$200 billion annually, beginning next Monday, a move that follows two previous rounds of 25 per cent tariffs on shipments worth US$50 billion a year. The tariff rate on the latest batch of goods will rise to 25 per cent on January 1, 2019.

China retaliated against the earlier US tariff rounds with equivalent levies on products amounting to the same value.

Trump’s latest move shows his administration’s determination to force Beijing to allow US companies to operate in China as Chinese companies can in America. China restricts foreign participation in key sectors including media, telecommunications and auto manufacturing, under Beijing’s agreement to join the World Trade Organisation in 2001.

In many cases, these restrictions force foreign companies to form joint ventures and turn over proprietary technologies to their local partners to tap the Chinese market.

“For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies,” Trump said in a statement released late Monday. “We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices.”

Administration officials briefed reporters in Washington about the new tariffs ahead of Trump’s statement.

We have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practicesDONALD TRUMP
“We have no problem with China trying to grow its economy, trying to lift its people out of poverty. … But in so doing, they cannot take actions that deliberately discriminate against other countries, actions that hurt American workers,” one senior administration official briefing the reporters said.

“And they cannot take actions that entirely [flout] the rules of the international trading system,” a second official added.

American retailers and other companies that depend on goods from China have opposed Trump’s use of punitive tariffs, which are intended to force Beijing to ease restrictions on foreign companies operating in China and end rules that effectively force the transfer of foreign intellectual property to Chinese joint venture partners.

Trump is also trying to balance a trade relationship that saw a record deficit of US$375 billion with China last year. America, which imported US$505 billion worth of Chinese products last year, is the country’s largest export market. China was America’s third-largest export destination after Canada and Mexico last year, according to US Census Bureau data.

Trump’s critics have, all along, said unilateral tariffs will not be as effective as a united-front approach involving the EU, Japan and other strategic allies.

“If Trump again tries to basically make China ‘cry uncle’, that is not going to work,” Claire Reade, former assistant US trade representative for China affairs, who served in the administrations of George W. Bush and Barack Obama, told South China Morning Post.

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“The more he presses for a kind of public victory, the harder it’s going to be to move the two sides” to a resolution, said Reade, who now advises clients on US and Chinese governmental issues at Washington-based law firm Arnold & Porter.

Trump and his closest advisers, including Larry Kudlow, director of the National Economic Council, US Trade Representative Robert Lighthizer, and National Trade Council Director Peter Navarro have disregarded warnings that tariffs will raise costs for US companies and consumers.

Trump and his trade hawks instead characterise their approach as the best way to force China to accept full reciprocity in the bilateral economic relationship.

White House economic adviser Larry Kudlow speaks during a meeting of the Economic Club of New York on Monday. Photo: Reuters
China is the “biggest culprit” in terms of doing damage to the global trading system, Kudlow said just hours before the tariff announcement, speaking at an Economic Club of New York event.

“The reality is we cannot permit the theft of our intellectual property. We must strive for American ownership of American companies in China,” he added.

Trump’s latest tariff move and Kudlow’s comments follow mixed signals from the White House whether the administration wants to negotiate a settlement to the trade war.

Last week, the US Treasury Department invited senior Chinese officials, including Vice-Premier Liu He, to the United States for talks with Treasury Secretary Steven Mnuchin, an invitation Beijing welcomed.

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No details about the proposed talks between Liu and Mnuchin were offered in Monday’s briefing in Washington.

However, over the weekend, The Wall Street Journal reported that the Chinese could well reject the talks if the additional tariffs went into effect.

Earlier on Monday, before Kudlow spoke, Trump said that tariffs had put the US in a very strong bargaining position and “billions of dollars, and jobs” had flowed into the US.

“If countries will not make fair deals with us, they will be ‘Tariffed!’” the president said on Twitter.

“We are willing to talk with China anytime if they are willing to move towards serious talks to remedy the trade problems,” Kudlow said.

“On something of substance, [Trump’s negotiating team wants Chinese counterparts to] just say yes. Just say yes to a couple of things and then we can move ahead.”

Responding to warnings from trade-reliant companies including Apple about the potential financial toll the tariff war will take, Trump exempted some product categories were left off the latest tariff list, including smartwatches, the administration officials said.

Earlier this month, Apple sent a letter to Lighthizer’s department, warning that consumers buying Apple Watches and AirPods, as well as some of the tech manufacturer’s computers and accessories would need to pay more under the tariff plan Trump signalled at the time.

Other product categories include chemicals used in agriculture, health and safety products such as helmets, as well as childcare products.