2019-02-26
The Trump administration plans to impose 25 per cent tariffs on up to $60bn in annual imports from China, targeting products such as robots and high-speed trains, as the US also ramps up efforts to block Chinese investment in strategic sectors.
In what the White House on Thursday billed as a historic move against “economic aggression”, President Donald Trump unveiled the plans after his government concluded that Beijing had for decades pursued a strategy of unfairly acquiring US intellectual property.
Mr Trump said he was taking the action to address the US’s $375bn trade deficit with China, adding: “It is the largest deficit of any country in the history of our world. It is out of control.”
The tariffs, Mr Trump said, would “make us a much stronger, richer nation”.
US officials said they would release a detailed list within 15 days but planned to target 10 strategic sectors identified by Beijing as part of a “Made in China 2025” plan pushed by President Xi Jinping. Those sectors included robotics, aerospace, maritime and modern rail equipment, as well as electric vehicles and Biopharma products.
The latest punitive measures amount to a marked escalation in US efforts to curb what it sees as unfair Chinese trade practices, coming soon after tariffs on imports of steel, alumininum and solar cells. Congressional Republicans, US business leaders and American allies have all expressed fears the moves could unleash a global trade war.
“Hitting billions in goods with tariffs runs the risk of putting a bigger dent in the pocketbooks of American families across the country,” said Orrin Hatch, the Republican chairman of the Senate finance committee, while commending the president for taking action against Beijing.
The Trump administration offered a concession to its crtics on Thursday, when it agreed to exempt the EU and other allies from the steel and aluminiun tariffs pending negotiations on a permanent carve-out.
In addition to new tariffs on Chinese technology and precision engineering imports, Mr Trump was also set to order the US Treasury to come up with a plan to impose new restrictions on Chinese investment in similar sectors within 60 days, officials said.
Such a regime would run in parallel with the work of the Committee on Foreign Investment, which examines foreign investments for potential threats to US national security. The committee has been taking an increasingly dim view of Chinese acquisitions in recent years.
Robert Lighthizer, the US trade representative, said the targeted Chinese products would not include many consumer items and had been chosen via an “algorithm” to minimise harm to US consumers while maximising the impact on China.
“We can’t be in a position where China can go out and buy US technology in a variety of ways that are troubling to us,” Mr Lighthizer told a congressional hearing on Thursday. “These are things that if China dominates, it’s bad for the world.”
In a nod to allies, which want the US to work within the global trading system, Mr Trump is also ordering his officials to launch a case at the World Trade Organization against what Washington claims are China’s biased technology licensing rules. The Trump administration argues that such rules in effect block many US firms from competing in the Chinese market.
Mr Trump has often criticised the WTO but the US has been seeking backing from the EU and Japan since last year for its actions against China’s intellectual property practices. Those allies have insisted that any moves should include actions at the WTO.
“This is a historic event. President Trump should be applauded for his courage and vision on this,” said Peter Navarro, the former academic who runs the White House office of trade and manufacturing policy.
Mr Navarro said the move was part of a new National Security Strategy that the Trump administration presented in December, which labelled China a strategic competitor and cited its “economic aggression” against the US.
The strategy represented a shift from the previous approach of treating China as an economic partner, which dated back to the Nixon administration.
The US wants China to change its behaviour while also protecting important US industries, Mr Lighthizer told a Senate hearing on Thursday.
Many business groups are wary of the new tariffs, while some Republicans in Congress view them as unnecessary and ill-conceived. They fear it is likely to undo many of the benefits of tax cuts they fought hard to pass in December.
The administration appeared to take a more deliberate approach in rolling out the new tariffs on China than it did with steel and aluminium tariffs earlier this month, which were roundly criticised by US business groups and Republicans in Congress, partly for the chaotic way in which they were unveiled.
White House officials stressed to reporters that the China move had been the result of strenuous inter-agency deliberations.