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Trump announces measures to punish China for unfair trade practices

President Donald Trump signs a presidential memorandum imposing tariffs and investment restrictions on China in the Diplomatic Reception Room of the White House, Thursday, March 22, 2018, in Washington. (AP Photo/Evan Vucci)

WASHINGTON (SBG) — President Donald Trump announced on Thursday that he is taking steps to combat China's unfair trade and investment practices with up to $60 billion in tariffs on Chinese goods.

In a signing ceremony at the White House, Trump said the measures were "a long time in the making" and represent "the first of many" actions his administration will be taking to ensure fair trade with China.

"The word is reciprocal. That's the word I want everyone to remember," Trump said. "If they charge us, we charge them the same thing. That's the way its got to be. That's not the way it is. For many decades it has not been that way."

The president also said he is negotiating a deal with Chinese President Xi Jinping to reduce the U.S. trade deficit with China by 25 percent, or $100 billion.

The president's announcement is based on the conclusions of an investigation by the office of the U.S. Trade Representative (USTR) that began in August under the authority of Section 301 of the 1974 Trade Act. The 301 investigation report documents a pattern of Chinese "economic aggression" including intellectual property theft, forced technology transfers and other practices that cost U.S. companies of billions of dollars each year.

In response to findings, White House officials are looking at a whole of government plan to recoup U.S. losses and limit the ability of Chinese financial entities to invest in the United States.

Within the next 15 days, the USTR will publish a list of Chinese products that are eligible for tariffs. That will open a period of public comment where U.S. companies and stakeholders can register their support or opposition and seek exemptions.

The Treasury Department will have the next 60 days to draft a set of actions to hold China to account. The White House did not specify what Treasury will propose, but indicated that they will be aimed at restricting Chinese financial entities from investing in or attempting the forcibly take over U.S. entities.

The president has also directed U.S. Trade Representative Robert Lighthizer to pursue a dispute settlement against China at the World Trade Organization.

Peter Navarro, White House director of trade and industrial policy, told reporters on Thursday that the $60 billion tariffs represent a "conservative" estimate of what U.S. companies lose each year to China. Those duties, he said, "are designed to basically compensate the United States for the harm that China's restrictive ownership requirements...are imposing on America."


The tariffs will not account for China's cyber-enabled intellectual property theft, the exact costs of which is unknown.

Chinese officials responded to Trump's announcement on Thursday, with the Ministry of Commerce issuing a statement saying China will "take all necessary measures" to defend its rights and interests and "stands firmly against such unilateral and trade protectionist practices from the U.S. side."

The Chinese Foreign Ministry expressed its desire to continue discussions with the United States in the spirit of mutual respect.

U.S. markets reeled in response to the announcement. The Dow Jones Industrial Average lost nearly 3 percent on Thursday. The S&P 500 and Nasdaq also fell by more than 2 percent on fears that the president's announcement could trip off a trade war between the world's two largest economies.

A number of American companies and trade associations voiced their opposition to the duties, noting that they will make consumer goods more expensive for Americans.

Dozens of trade organizations representing agriculture, technology, textiles, retailers and other sectors, issued a statement saying the imposition of tariffs "would trigger a chain reaction of negative consequences for the U.S. economy, provoking retaliation; stifling U.S. agriculture, goods, and services exports; and raising costs for businesses and consumers."

White House officials countered the criticism of short-term losses, arguing that the harm that done to the American economy over the long-term as a result of Chinese intellectual property theft is "almost incalculable."

On Capitol Hill, the president's actions were met with caution on both sides of the aisle.

Sen. Jeff Flake, R-Ariz., who introduced a bill earlier this month to nullify Trump's aluminum and steel tariffs, told reporters that the China tariffs appear more targeted and "appropriate." He warned that the trade penalties are "only effective if we have our allies with us," noting that the steel and aluminum tariffs hurt a number of those allies.

According to the White House, President Trump has been in dialogue with Japan and the European Union about China's intellectual property theft and trade abuses. The White House believes those countries and others have common cause with the United States and a vested interest in protecting their corporations and ensuring fair market access.

Sen. Sherrod Brown, D-Ohio, said he likes the fact that Trump is "being aggressive with tariffs." He noted that tariffs are only one part of the equation and said he supports steps like those the Treasury may undertake to limit Chinese foreign investment in the United States. Brown cosponsored legislation to review such foreign investments and ensure it does not result in foreign control of vital U.S. business.

With at least two weeks until the USTR proposes specific products for tariffs and two months before the Treasury is expected to make its recommendations, many lawmakers took a wait and see approach.

"Until I see exactly what it is, what the backfire is and how they manage it, it's hard to say, 'Slamdunk, this is a win,'" Sen. Sheldon Whitehouse, D-R.I. said. "But I do think its important that we address those concerns."

The Trump administration's policy is driven principally by economic and strategic concerns. China's trade practices were specifically addressed in the 2017 National Security Strategy.

Among the core conclusions reached in the 301 investigation, is that China is using the tools of the state to forcibly acquire innovative technologies and gain an unfair advantage over the United States and other countries in areas that White House officials described as "industries of the future."

One pattern of behavior the 301 investigation documented was U.S. firms being denied market access by the Chinese government, except under terms involved the corporations forfeiting their trade secrets or handing over equity and majority ownership to a Chinese entity.

Specifically, China is seeking a competitive edge in ten industries where the United States currently leads, including aviation, information technology, robotics, artificial intelligence, biotechnology and telecommunications.

To get there, they have used state-sponsored sovereign wealth funds, for mergers and acquisitions, taking over U.S. companies or purchasing intellectual property rights.

The long-term plan, according to the report, is Chinese "dominance" over its domestic market and regional markets, assisted by state economic and military resources.

The 301 investigation documented Chinese trade and investment abuses over more than a decade, leading members of the Trump administration to conclude that past efforts to simply talk through trade abuses had failed. Following China's 2001 accession to the World Trade Organization, U.S. administrations regularly engaged in dialogues aimed at pushing the country toward a free-market system and away from central control.

The results were not successful Navarro said. "Talk is not cheap, in fact, it's been very expensive."

The administration's objective is to use the trade tools available to bring China into accord with a free-market-based, global trade system, Navarro explained. If the actions under consideration do that, he said, it "will be healthy for the U.S. economy and the global trading system."

President Trump attempted to engage President Xi in a dialogue to address the unfair trade practices, inviting the Chinese leader to Mar-A-Lago in April 2017. Trump reportedly was not able to make headway with Xi on trade issues.

Shortly after the meeting, Trump issued a directive to review steel and aluminum dumping, which resulted in the across the board tariffs introduced earlier this month. That was followed by the August directive to launch the 301 investigation.






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