Donald Trump to hit US$50 billion of Chinese imports with 25 per cent tariffs and restrict investment in US hi-tech industries

The move, which aims to halt the transfer of ‘industrially significant’ technologies to China, drew a rebuke from Beijing over the ‘contradiction’ of the consensus reached in Washington

PUBLISHED : Tuesday, 29 May, 2018, 9:11pm
UPDATED : Wednesday, 30 May, 2018, 12:32pm

US President Donald Trump said on Tuesday that he would place punitive tariffs on US$50 billion of Chinese imports and restrict investment in the American hi-tech industry, drawing a rebuke from Beijing.

The US “will impose a 25 per cent tariff on $50 billion of goods imported from China containing industrially significant technology, including those related to ‘Made in China 2025’,” the White House said, referring to the Chinese government’s policy to support domestic development of strategic technologies.

“To protect our national security, the United States will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology,” in addition to the tariffs, the announcement added.

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The list of targeted goods will be made public on June 15, and investment restrictions and export controls are to be announced on June 30, the White House said. The tariffs, to be levied under Section 301 of the Trade Act of 1974, and restrictions will be imposed “shortly” after the announcement.

The actions are part of “multiple steps to protect domestic technology and intellectual property from certain discriminatory and burdensome trade practices by China”, the White House said.

China’s commerce ministry responded immediately, saying the move “clearly contradicts the consensus reached by China and the US in Washington recently".

"China is confident, capable and experienced to defend Chinese people's interests and national core interests, regardless of whatever measures the US side could take," the ministry said in an official statement.

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Trump’s latest move contradicts US Treasury Secretary Steven Mnuchin’s remarks on May 20 that Washington was putting trade action “on hold”. It also comes amid bipartisan criticism in the US Congress about concessions Trump has made to China, particularly regarding sanctions against Chinese telecommunications equipment maker ZTE.

Mnuchin’s comments appeared to freeze US Trade Representative Robert Lighthizer’s plan to put the tariffs into effect after a period of public comment ended on May 22. The specific timing for activation of the tariffs had not been announced previously.

David Dollar, a China expert at the Brookings Institution, a Washington-based think tank, said the news that Trump would levy the tariffs was “surprising” because of Mnuchin’s earlier comments.

“It looks like the China doves control policy one day, and the China hawks the next,” Dollar said of Trump and his top advisers. “I am sure that the Chinese are confused about what US policy is.”

White House trade adviser Peter Navarro, who along with Lighthizer has pushed the hardest line against China among Trump’s team, was not involved in the most recent round of talks in Washington. He was part of Mnuchin’s delegation to Beijing in early May for the first round, which produced no consensus.

I am sure that the Chinese are confused about what US policy is
David Dollar, Brookings Institution

The full line-up of administration officials expected to go to Beijing with US Commerce Secretary Wilbur Ross for the next round has not been announced.

Last month, Ross’s department initiated a ban on sales of components by American companies to ZTE. The department said ZTE had made false statements about measures it had agreed to take against employees running a unit that was doing business with Iran in violation of sanctions.

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The last week on Twitter, Trump said he would “let [ZTE] reopen” provided the Chinese company pays a US$1.3 billion fine and consents to staffing changes, among other restrictions.

Republican Senator Marco Rubio of Florida and Chuck Schumer, the Senate minority leader and a New York Democrat, have led the criticism of Trump’s reprieve for ZTE.

Derek Scissors, a China expert at the American Enterprises Institute, said the US tariff announcement on Tuesday may show that the White House “is trying to make sure Congress doesn’t overrule the sanctions relief for ZTE”.

"Influential members of Congress were concerned that lifting the sales ban on ZTE indicated Trump was giving up on changing Chinese policies," he said. "This is an attempt to both keep the ZTE deal and show that Trump has not frozen US economic policy toward China."

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Last week, the US House of Representatives passed a bill – which will next move to the Senate – that would ban US government employees from using ZTE products and stop the Defence Department from dealing with the company’s vendors.

One of the law’s provisions also requires Trump, before making any ZTE deal, to certify to Congress that the Chinese company has not violated US laws for the past year and is cooperating with US investigations.

Ross himself will visit China from Saturday through June 4, China’s official news agency, Xinhua, reported on Friday, without giving further details.

That meeting will be the third round of bilateral talks between Trump’s top economic advisers and China’s chief negotiator in the trade dispute, Vice-Premier Liu He.

Those earlier rounds of talks led to a joint statement released by the White House on May 19, touting “a consensus” reached on “taking effective measures to substantially reduce” the trade imbalance.

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A day later, Mnuchin said Trump’s government had put its punitive tariff plan “on hold w hile we try to execute the framework” agreement on reducing China’s trade surplus with the US, pegged at US$375 billion in 2017.

The US-China Business Council, an advocacy group with some 200 member companies including IBM, Ford Motor Company and the namesake consulting firm of US elder statesman Henry Kissinger, called on Tuesday for Trump to keep his tariff directive on hold.

“We would like to see both sides put the threat of sanctions on hold and quickly get into negotiations to resolve these important issues,” John Frisbee, the Washington-based group’s president, said in an announcement published shortly after the White House statement.

“Tariffs and restrictions on commerce will have a real and negative impact on the economy and jobs. We need solutions that will put the trade relationship on a sounder path for mutual prosperity, not sanctions that will do more harm than good.”

Before Tuesday’s announcement, the two sides appeared to be heading down that path.

Mnuchin said on May 20 that China could increase imports of agricultural goods by up to 40 per cent this year and expected a “doubling” of US energy product purchases, to as much as US$60 billion, in three to five years.

Liu told Xinhua around the same time that the two countries had agreed that they would not engage in a trade war and that both sides would halt the punitive tariffs they had threatened to impose.