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Trump moves toward China tariffs in warning shot on technology transfer

From Reuters - March 22, 2018

WASHINGTON (Reuters) - U.S. President Donald Trump lit a slow-burning fuse on Thursday to launch long-promised anti-China tariffs, but his actions appeared to be more of a warning shot than the start of a full-blown trade war with Beijing.

A presidential memorandum signed by Trump will target up to $60 billion in Chinese goods with tariffs over what his administration says is misappropriation of U.S. intellectual property, but only after a 30-day consultation period that starts once a list is published.

Trump gave the Treasury Department 60 days to develop investment restrictions aimed at preventing Chinese-controlled companies and funds from acquiring U.S. firms with sensitive technologies.

The waiting periods will give industry lobbyists and U.S. lawmakers a chance to water down a proposed target list that runs to 1,300 products, many in technology sectors.

It also will create space for potential negotiations for Beijing to address Trumps allegations on intellectual property and delay the start of immediate retaliation against U.S. products from aircraft to soybeans.

I view them as a friend Trump said of the Chinese as he started his announcement. We have spoken to China and we are in the middle of negotiations.

FIGHT TO THE END

But his actions provoked a belligerent response from Chinas embassy in Washington, which vowed Beijing would fight to the end in any trade war with the United States.

We will retaliate. If people want to play tough, we will play tough with them and see who will last longer, Chinese ambassador Cui Tiankai said in a video posted to the embassys Facebook page.

Stocks fell sharply on Trumps announcement, with the Dow Jones Industrial Average falling nearly 3 percent. Major industrials that could become targets of Chinese trade retaliation slumped further, with aircraft maker Boeing down 5.2 percent and earthmoving equipment maker Caterpillar falling 5.7 percent.

In addition to punitive tariffs, Trumps memo also directed U.S. Trade Representative Robert Lighthizer to challengeChinas technology licensing programs at the World Trade Organization. The WTO has repeatedly drawn the ire of the administration but it could provide a resolution that avoids a trade war.

The steps are based on the results of USTRs eight-month investigation of suspected misappropriation of American technology by China.

U.S. officials say that probe, undertaken through Section 301 of the 1974 Trade Act, has found that China engages in unfair trade practices by forcing American investors to turn over key technologies to Chinese firms.

Trump, who earlier this month announced steep tariffs on steel and aluminum imports to the United States, also wants the Chinese to take action that would lower the $375 billion goods trade deficit that the United States is running with China.

White House officials told a briefing ahead of the trade announcement that the administration was eyeing tariffs on $50 billion in Chinese goods. They said the figure was based on a calculation of the impact on the profits of U.S. companies that had been forced to hand over intellectual property as the price of doing business in China.

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