President Donald Trump escalated his trade war with China on Tuesday by threatening to slap new tariffs on $50 billion in imported goods ranging from bakery ovens to ball bearings.
The action is the latest step in Trump’s trade offensive that aims to punish Beijing for pursuing policies accused of bolstering its own technological and economic development at the expense of U.S. companies. The tariffs are likely to invite even more retaliation from China, which has already hit back against separate U.S. trade restrictions on steel and aluminum by hiking tariffs on $3 billion worth of U.S. imports of pork, scrap aluminum, wine and other agricultural products.
On March 22, Trump directed his administration to take action after a monthslong investigation into allegations that Beijing is forcing U.S. companies to transfer valuable technology as a condition of doing business there. The proposed list published Tuesday includes 1,300 products that will be subject to new tariffs after a public comment period.
The value of the product list would equal to the annual damage the Trump administration says U.S. companies suffer as a result of China’s technology transfer policies. The levies are aimed primarily at manufacturing sectors China is accused of bolstering through state-backed companies and programs.
China’s ambassador to the U.S., Cui Tiankai, said on Tuesday that China “will certainly take countermeasures of the same proportion and the same scale, same intensity.”
The envoy played down allegations that the Chinese government was involved with siphoning off U.S. innovation, adding that it was strengthening efforts to protect intellectual property.
“It’s not a matter of who will get supremacy, the real question is how we can make all these technologies benefit as many people as possible,” he said in a video posted to website of China Global Television Network.
The administration’s investigation put special attention on the “Made in China 2025" initiative, viewed by many China hawks as an aggressive industrial policy to establish Beijing’s dominance of technologies of the future at the expense of U.S. innovators. The 10-year plan targeted manufacturing sectors such as advanced information technology, robotics, renewable energy vehicles and pharmaceuticals.
U.S. Trade Representative Robert Lighthizer stressed the importance of technology to the U.S. economy when he announced the trade action at a White House ceremony last month.
“There's 44 million people who work in high-tech knowledge areas. No country has as much technology-intensive industry as the United States. And technology is really the backbone of the future of the American economy,” he said.
A senior White House official said last month the value of targeted imports is a “very conservative estimate of harm” because it doesn’t include instances of blatant cyber theft of U.S. technology and trade secrets.
The White House said last month it would impose a 25 percent tariff on the targeted products.
The administration plans at least two other trade actions as a result of the investigation. The Treasury Department is developing new restrictions that would block Chinese companies from being able to invest in sectors of the U.S. economy where it has sought to obtain U.S. technology. USTR is also pursuing a case at the WTO challenging China’s allegedly discriminatory technology licensing policies.
“Administrations before us and this administration have tried very, very hard to work with the Chinese,” senior White House trade adviser Peter Navarro told reporters last month. “The problem with the Chinese in this case, talk is not cheap, it’s been very expensive to the American people.”
Tough action against China could earn more support in Congress than the recent steel and aluminum tariffs, which Republican lawmakers condemned as overly broad and harmful to allies. However, lawmakers have expressed caution that unilateral tariffs could provoke potentially disastrous retaliation against U.S. exporters, including U.S. farmers who rely on the market in China as a major destination for soybeans and other commodities.
The go-it-alone approach could also further stoke tensions with U.S. allies that are also opposed to China’s trade policies, but may view the action as counterproductive to a broader solution.
Trump and other senior administration officials have signaled that they are open to negotiating a resolution with China, but it’s still unclear what specific actions they want Beijing to take.
Trump said the U.S. and China were “in the midst of a very large negotiation“ when he signed the proclamation last month directing the government to pursue the trade restrictions.
“I believe that, in many cases — maybe all cases — we'll end up negotiating a deal,” Trump said, also mentioning efforts to modernize NAFTA
Treasury Secretary Steven Mnuchin said last week that the U.S. and China were simultaneously having negotiations.
“As the president has said, we want to cut the trade deficit $100 billion over the next year,” Mnuchin said. “We want to eliminate forced joint ventures, forced technology, and we're having very productive conversations with them.”
But he warned that tariffs are not being put on hold “unless we have an acceptable agreement that the president signs off on.”