U.S. to slap tariffs on $50B in Chinese imports

The Trump administration said on Tuesday it would hit China with 25 per cent tariffs on some 1,300 industrial technology, transport and medical products as part of its drive to force changes in Beijing's intellectual property practices.

The U.S. Trade Representative's (USTR) office unveiled a list of mainly non-consumer products representing about $50 billion US of annual imports that would nonetheless hit supply chains for many manufacturers.

The list ranges from chemicals to light-emitting diodes, motorcycles and dental devices.

Publication of the tariff lists starts a public comment and consultation period expected to last around two months, after which USTR said it would issue a "final determination" on the product list. It has scheduled a May 15 public hearing on the tariffs.

USTR said the tariffs were proposed "in response to China's policies that coerce American companies into transferring their technology and intellectual property to domestic Chinese enterprises." The agency added that such policies "bolster China's stated intention of seizing economic leadership in advanced technology as set forth in its industrial plans, such as Made in China 2025.

How China will retaliate

China condemned the U.S. announcement and said it would "take corresponding measures of equal scale and strength against U.S. products."

"The Chinese side strongly condemns and firmly opposes the unfounded Section 301 investigation and the proposed list of products and tariff increases based on the investigation," a Chinese embassy statement said.

"As the Chinese saying goes, it is only polite to reciprocate. The Chinese side will resort to the WTO dispute settlement mechanism and take corresponding measures of equal scale and strength against U.S. products in accordance with Chinese law."

At a news conference Tuesday, Chinese State Councillor and Foreign Minister Wang Yi said, "Despite the rise of protectionism in the world, China will remain committed to openness [and] will open wider to the rest of the world." 

China has denied that its policies require technology transfers from U.S. companies and has suggested its own trade targets could include U.S. soybeans, aircraft or heavy equipment. The dispute has raised fears about a possible trade war between the world's two largest economies.

Markets react

The U.S. tariff list followed China's imposition of tariffs on $3 billion worth of U.S. fruits, nuts, pork and wine to protest new U.S. steel and aluminum tariffs imposed last month by U.S. President Donald Trump.

The standoff between the world's two largest economies has sparked market fears that they could spiral into a trade war that could crush global growth. Asian share markets were mixed amid trade tension concerns, with Japan's Nikkei 225 off 0.1 per cent but Shanghai's main index poised to open 0.3 per cent higher.

The U.S. list heavily targets advanced technology products that benefit from Beijing's Made in China 2025 program, which aims to replace advanced technology imports with domestic products and build a dominant position in future industries.

The state-led 2025 program targets 10 strategic industries: advanced information technology, robotics, aircraft, new energy vehicles, pharmaceuticals, electric power equipment, advanced materials, agricultural machinery, shipbuilding and marine engineering and advanced rail equipment. Many products in those segments appear on the list, including antibiotics and industrial robots.

Higher priced TVs, cars?

Many consumer electronics products such as cellphones made by Apple Inc. and laptops made by Dell were excluded, as were footwear and clothing, drawing a sigh of relief from retailers who had feared higher costs for American consumers.

But the USTR did include some key consumer products from China, including flat-panel television sets and motor vehicles, both electric and gasoline-powered with engines of three litres or less.

A Reuters analysis that compared listed products with 2017 Census Bureau import data showed $3.9 billion in flat-panel television imports, and $1.4 billion in vehicle imports from China.

Among vehicles likely to be hit with tariffs is General Motors Co.'s Buick Envision sport-utility vehicle, which is assembled in China and sold in the United States. Volvo, owned by China's Geely Motors, also exports Chinese-built vehicles to the United States.

Business community responds

U.S. business groups reacted cautiously, saying they agreed with Trump's efforts to stop the theft of U.S. intellectual property, but questioning whether tariffs were the right approach.

"Tariffs are one proposed response, but they are likely to create new challenges in the form of significant added costs for manufacturers and American consumers," National Association of Manufacturers President Jay Simmons said in a statement.

U.S. Senator Marco Rubio said in a letter to U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin that he was glad to see "bold" action against China. "These necessary actions constitute an important break with the appeasement of previous administrations, and provide an opportunity to chart a new course for America's relationship with this strategic competitor," Rubio wrote.