18 June 2018

4 things to watch as Trump's tariffs hit China


The Trump administration is moving ahead with a plan to assess steep new tariffson $50 billion worth of products made in China and exported to the U.S. The United States Trade Representative on Friday released a list of $34 billion in Chinese goods that would face tariffs of 25 percent. President Donald Trump approved the tariffs after a meeting with trade and Cabinet officials on Thursday.  The USTR said it would initially impose tariffs on 818 products made in China, effective July 6. An additional 284 Chinese imports, worth $16 billion, also could face tariffs pending a final decision by the trade office and time to solicit public comment. "We must take strong defensive actions to protect America's leadership in technology and innovation against the unprecedented threat posed by China's theft of our intellectual property, the forced transfer of American technology and its cyber attacks on our computer networks," said U.S. Trade Representative Robert Lighthizer said in a statement. 


The list of tariffs amounts to a major escalation by the U.S. of its trade dispute with China, which has vowed to swiftly retaliate with similar tariffs. Treasury Secretary Steven Mnuchin said in May that a trade war with the world's second-largest economy was on hold
Tariffs more narrowly focused 

The list of 1,102 items is narrower than the initial list of 1,300 that was released for consideration for tariffs earlier this year. It's part of "a bid to slow China's technological advance," Heights Securities analyst Clayton Allen wrote in a note before they were released. 

"These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China," Mr. Trump said in a statement. But U.S. tech companies and trade groups, long critical of a number of China's trade practices, are opposed to tariffs as a way to curb Beijing's behavior.

"Tariffs are the wrong answer to China's ongoing discriminatory and damaging trade practices. By imposing tariffs on consumer goods and key components of such goods, the president would needlessly take money out of Americans' pockets – harming the very people he hopes to help, not punishing China," said Dean Garfield, CEO of the Information Technology Industry Council (ITI), said in a statement. 

Garfield said tariffs will raise prices on televisions, computers, phones and "similar everyday items" because of taxes on components like LED screens and sensors. 
China responds in kind

China has announced tariffs on U.S. goods, saying it would impose 25 percent levies on a list of 545 goods including cars, seafood and agricultural products.

The two countries previously seemed to be approaching agreement, with China considering buying more U.S. products to narrow the deficit. However, that's now off the table. "All the economic and trade achievements previously negotiated by the two parties will become invalid," the commerce ministry said. 

It also accused the U.S. of flip-flopping and "provoking a trade war," saying, "This move is not only damaging bilateral interests but also undermining the world trade order."

Mr. Trump in April also threatened to escalate tariffs even further on China, adding another $100 billion. That leaves open the possibility of even further escalation.

Other issues could complicate matters

By June 30, the administration plans to announce investment restrictions and "enhanced export controls" for Chinese "persons and entities related to industrially significant technology," according to a White House statement last month.

And a bipartisan group of senators filed an amendment to the defense bill now under consideration that would prohibit the federal government from using ZTE or Huawei telecom equipment or services "and that they receive no taxpayer dollars." The move comes as the White House struck an agreement with Beijing to keep ZTE alive, including the company's payment of a $1 billion fine.
America's allies are also preparing for trade war

Canada, the EU and South Korea are now subject to more tariffs than the U.S.'s traditional adversaries, according to calculations from the Council on Foreign Relations. Those allies aren't standing by idly. The EU on June 14 became the latest to solidify its countertariffs to those Mr. Trump placed on steel and aluminum that took effect in recent weeks. Mexico and Canada have released retaliatory tariffs of their own.

There are already signs the metal tariffs, on top of those for solar panels and washing machines, are starting to hit some U.S. businesses. 

"In addition to their direct impact on trade, continued tit for tat tariffs will likely generate more volatility in financial markets," said Madhavi Bokil, a senior credit officer at Moody's. 

The tariffs themselves are a small percentage of the economy, International Monetary Fund General Manager Christine LaGarde said at an event Thursday.

"What's more difficult to factor in at the moment...is the actual impact on confidence, on investors in particular but on the business community and the consumers as well," she said. 

CBS News' Jillian Harding contributed reporting.

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