By Brian Bradley / www.americanshipper.com / June 19th, 2018
The president says the U.S. would implement an additional $200 billion in tariffs if China retaliates against the $50 billion already planned.
President Donald Trump on Monday evening threatened tariffs of up to $450 billion annually against Chinese products if trade actions between the two countries escalate.
In a statement, Trump announced he directed U.S. Trade Representative Robert Lighthizer to identify $200 billion worth of Chinese goods for additional tariffs of 10 percent, after the government of China stated it would retaliate against U.S. tariffs against $50 billion worth of Chinese goods, the first phase of which is set to take effect July 6.
The first set of U.S. tariffs covers 818 tariff lines and a yearly import value of $34 billion, and the second set, which will undergo a public notice and comment period, comprises 284 tariff lines totaling an annual import value of $16 billion.
The U.S. tariffs are aimed at Chinese products identified as containing technologies that benefit from China’s “Made in China 2025” industrial policy.
“Though a trade war is not something we want, we are definitely not afraid of one,” a Chinese Foreign Ministry spokesperson said during a Tuesday press conference. “We will continue to take effective measures to firmly safeguard the interests of our nation and our people and resolutely uphold the economic globalization and the multilateral trading system.”
If China issues retaliatory tariffs against the United States’ planned $50 billion tariffs and refuses to change business practices, the U.S. will impose another $200 billion in tariffs, Trump said.
If China then raises its tariffs again, the United States will pursue tariffs on another $200 billion of goods, Trump said.
White House trade adviser Peter Navarro said during a call with reporters on Tuesday that China has “much more to lose” than the U.S., mentioning last year’s trade balance between the nations.
China exported about $505.5 billion to the United States last year, while the U.S. exported about $130.4 billion to China in 2017.
Simon Lester, associate director for the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, said in an email Tuesday that he believes Trump may think the U.S. has the upper hand because it imports a lot more from China than vice versa.
But China can take a wide range of actions to make business difficult for U.S. companies operating in the country, including not honoring U.S. patents and copyrights and not granting regulatory approval to U.S. companies, Lester added.
He estimated that any official U.S. action to impose the first $200 billion in tariffs above the $50 billion already in progress is still a couple months away.
“I think what we need to watch is what happens by July 6,” Lester said. “Will a deal be achieved by then?”
Also noting the date the tariffs are set to start taking effect, Gary Hufbauer, nonresident senior fellow for the Peterson Institute of International Economics, said, “We’ve still got some time” for negotiations to go forward, but noted that Trump might not be convinced to relax his position without a continued negative reaction from financial markets as well as a rising chorus of congressional opposition to the measures.
However, a previous proposal from China to buy $70 billion more per year in U.S. goods, including a significant amount of additional agricultural products and liquefied natural gas, could re-enter talks, he said.
That offer “might be enriched somewhat [and] made more concrete,” Hufbauer said. “That may be put in place, and we may avert this trade war.”
Still, given Trump’s hard-line trade approach, Hufbauer doesn’t envision a “natural resolution” of the ongoing bilateral trade dispute in the foreseeable future, he said.
“He’s ramping up more than I thought, so I’m disinclined to think it’s going to go away,” Hufbauer said.
Navarro acknowledged public concerns about impacts of tariffs on world financial markets, but noted that a bilateral trade dispute should ultimately have a relatively small effect on two economies with annual GDP that equals $30 trillion.
Another issue that could have bearing on Trump’s approach, though not economically related to the central issues of the U.S.-China trade relationship, is Trump’s repeated statements about his friendship with Chinese President Xi Jinping.
“I have an excellent relationship with President Xi, and we will continue working together on many issues,” Trump said in his statement. “But the United States will no longer be taken advantage of on trade by China and other countries in the world. We will continue using all available tools to create a better and fairer trading system for all Americans.”
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