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Trump ratchets up tariff pressure on China with $200 billion hit

Sep 18 2018 09:07
Andrew Mayeda and Jenny Leonard, Bloomberg

The Trump administration will slap a 10% tariff on about $200bn in Chinese goods next week, and more than double the rate in 2019, setting up what could be a prolonged trade war between the world’s two biggest economies.

The administration is giving US businesses a chance to adjust and look for alternative supply chains by delaying an increase of the tariff to 25% until next year, two senior administration officials who declined to be identified told reporters by conference call on Monday. The 10% tariff will take effect on September 24, the officials said.

"For months, we have urged China to change these unfair practices, and give fair and reciprocal treatment to American companies," President Donald Trump said in a statement released on Monday evening. "We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly. But, so far, China has been unwilling to change its practices."

Smart watches and Bluetooth devices were removed from the tariff list, along with bicycle helmets, high chairs, children’s car seats, playpens and certain industrial chemicals. They were among 300 tariff lines scrubbed from the preliminary target list released in July, according to one of the officials. No items were added, though the value will remain at $200bn worth of Chinese imports, the officials said.

Trump continues to ratchet up pressure on Beijing to change its trade practices even as he floats the idea of talks. Business leaders are warning the high-stakes strategy could upend their supply chains and raise costs, as economists worry Trump’s tactics could derail the broadest global upswing in years.

US is said to spare some apple goods from new China duties

“It appears that the administration responded to some industry concerns, but for many American businesses and consumers this still represents a rapid acceleration of costs and much higher uncertainty,” said Rufus Yerxa, president of the National Foreign Trade Council. “Business hates uncertainty. They’d rather have an imperfect trading relationship than this much chaos.”

Beijing has already said it will retaliate against the $200bn round of tariffs by imposing duties on $60bn of US goods ranging from liquefied natural gas to aircraft.

The decision throws into doubt efforts to reach a diplomatic breakthrough in the conflict. China will reject new trade talks if Trump moves ahead with the next round of US tariffs on Chinese products, two people familiar with the matter said on Monday.

The administration earlier this month floated the idea of talks led by Treasury Secretary Steven Mnuchin, with Chinese Vice Premier Liu He expected to lead the Beijing delegation. The US remains open to negotiations but China must show it’s seriously willing to make systemic economic changes, the senior administration officials said on Monday.

With the latest tariff escalation, American consumers could start feeling the cost in everyday goods. It brings all Chinese imports subject to added tariffs to $250bn, roughly half of China’s shipments to the US last year. The Trump administration in July and August already imposed 25% tariffs on $50bn on Chinese goods, sparking in-kind retaliation.

Trump said earlier this month he has tariffs ready to impose on a further $267bn of imports from China, which would push the cumulative total beyond the amount of goods the US bought from the Asian nation last year.

Working out

Trump told reporters earlier on Monday his impression is that Beijing wants to talk about a deal, and that he thinks “it’s going to work out very well with China.”

Officials from both countries have met four times for formal talks, most recently in August, when Treasury’s undersecretary for international affairs, David Malpass, led discussions in Washington with Chinese Vice Minister Wang Shouwen.

White House economic adviser Larry Kudlow has indicated that Trump could be willing to meet face-to-face with Chinese President Xi Jinping to smooth over trade tensions at the United Nations General Assembly later this month or at the Group of 20 nations leaders’ summit in Argentina from Nov. 30-Dec. 1.

The White House has sought to pressure Beijing to reduce its trade surplus with America and protect intellectual property rights of US companies, which it says are abused in China.

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