TRUMP HITS US$50B OF CHINESE GOODS AMID TRADE WAR FEAR.
“THIS HAS BEEN LONG IN THE MAKING .… THIS IS THE FIRST OF MANY — U. S . President Donald Trump “WE DON’T WANT A TRADE WAR BUT WE ARE NOT AFRAID OF IT —China’s ambassador to the U. S .
WASHNGTON • U.S. President Donald Trump took his boldest step to level the economic playing field with China, ordering sweeping tariffs on Chinese goods in a move that could escalate already tense trade relations between the world’s two biggest economies.
The president instructed U.S. Trade Representative Robert Lighthizer to levy tariffs on at least US$50 billion in Chinese imports.
Trump signed an executive memo issuing the instructions on Thursday at the White House. Within 15 days, USTR will come up with a proposed list of products that will face higher tariffs.
“This has been long in the making,” Trump said, adding that the tariffs could affect as much as US$60 billion in goods. “We have a tremendous intellectual property theft situation going on” with China affecting hundreds of billions of dollars in trade each year, he said.
As he signed the tariffs order, Trump told reporters, “This is the first of many.”
The threat of an escalating trade war with China that could disrupt global growth pushed U.S. stocks to their biggest decline in six weeks.
The benchmark S& P 500 Index slumped the most since early February and the Dow Jones Industrial Average lost more than 700 points after Trump ordered the tariffs on Chinese goods. The 10- year Treasury yield slid toward 2.8 per cent and gold advanced with the yen as investors sought safe havens. The U.S. dollar rebounded.
“The market doesn’ t like trade wars, the market doesn’t like that the Fed is adamant about raising rates,” said Matt Schreiber, president and chief investment strategist at WBI Investments.
“Yes the economy has been pretty strong, the labor market has less slack, but there’s nothing to really get fired up about and try to normalize rates to a level way above where we are.”
The U.S. will impose 25 per cent duties on targeted Chinese products to compensate for the harm caused to the American economy from China’s policies, according to a fact sheet released by USTR.
The proposed product list will include items in aerospace, information and communication technology and machinery. USTR will announce the proposed list in the next “several days,” according to the fact sheet.
Trump also directed Treasury Secretary Steven Mnuchin to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the U.S. views as strategic, said senior White House economic adviser Everett Eissenstat.
Policy-makers across the world are warning of a brewing trade war that could undermine the broadest global recovery in years. U.S. stocks fell sharply early Thursday amid worries that the U.S. action could provoke a stern response from China. Meanwhile, business groups representing companies ranging from Walmart Inc. to Amazon. com Inc. are warning U.S. tariffs could raise prices for consumers and side-swipe stock prices.
Even central banks, which normally stay above the fray of trade spats, are weighing in. “A number of participants reported about their conversations with business leaders around the country and reported that trade policy has become a concern,” Federal Reserve Chairman Jerome Powell said this week, while cautioning that trade issues haven’t changed the Fed’s outlook. The Bank of England warned Thursday that increased protectionism could have a “significant negative impact” on global growth.
The Trump administration is framing the move as a major turning point in U. S.China relations. It followed a seven-month investigation by USTR into allegations China violates U. S. intellectual property, under the seldom- used section 301 of the 1974 Trade Act. The U. S. concluded China engages in a range of violations, including policies that force American companies to transfer technology and the accessing of trade secrets through hacking, said Eissenstat.
Trump tried to make it clear he wasn’t trying to provoke China.
“I view them as a friend. I have tremendous respect for President Xi,” Trump said. But, the U. S.’s trade deficit with China is “the largest deficit in the history of our world,” he said.
The president’s action brought rare praise from Senate Democratic Leader Chuck Schumer, ordinarily a foe of the administration.
The president is “exactly right” to pursue the tariffs, Schumer said. “I want to give him a big pat on the back,” the New York senator added, “I’m very pleased that this administration is taking strong action to get a better deal on China.”
Trump’s actions represent a “seismic shift from an era dating back to Nixon and Kissinger, where we had as a government viewed China in terms of economic engagement,” White House trade adviser Peter Navarro told reporters on Thursday. “That process has failed.”
“The problem is that with the Chinese in this case, talk is not cheap. It has been very expensive for America,” said Navarro. “Finally the president decided that we needed to move forward.”
Commerce Secretary Wilbur Ross predicted a strong stand on trade would bring concessions without escalating into a broader conflict. ‘ We will end up negotiating these things rather than fighting over them, in my view,” Ross said.
Before the tariffs become final, there will be a 30- day comment period, the White House said. Trump also directed his officials to pursue a World Trade Organization complaint against China for discriminatory licensing practices.