Beijing vows to retaliate over tariffs
BEIJING — China says it is “fully prepared” for a trade war with the United States if it kicks off in earnest on Friday.
Hopes are dwindling for the world’s two biggest economies to reach a breakthrough this week before Washington starts charging tariffs on $34 billion US in Chinese imports. Beijing has pledged to retaliate with equal tariffs on $34 billion in U.S. goods.
The Chinese Foreign Ministry said Tuesday that China will be “fully prepared to take a package of necessary measures” to safeguard its national interests.
U.S. companies ranging from whiskey distilleries to automakers such as Ford and Tesla could be hit if China ramps up retaliatory measures.
U.S. President Donald Trump has accused China of unfairly acquiring U.S. technology and limiting market access for finance and technology firms — claims that China denies.
To understand why the United States and China stand on the brink of a trade war, consider the near-death experience of American Superconductor Corp.
The company, known as AMSC and based in Massachusetts, was reeling after a Chinese partner stole its technology — the electronic brains that run wind turbines. The loss was devastating. AMSC’s stock shed $1 billion in value, and the company cut 700 jobs, more than half its workforce.
“Attempted corporate homicide” is what CEO Daniel McGahn called it. In January, its Chinese partner, Sinovel Wind Group, was convicted in a U.S. court of stealing AMSC’s trade secrets.
To the Trump administration, Sinovel’s predatory practices are hardly isolated. Beijing, it charges, is orchestrating a brassknuckles campaign to supplant U.S. technological dominance and over the next few decades make Chinese companies global leaders in such fields as robotics and electric vehicles.
According to a report by the Office of the U.S. Trade Representative, Beijing’s tactics include coercing American companies to hand over trade secrets in return for access to the Chinese market; forcing U.S. businesses to license technology in China on unfavourable terms; using state funds to buy up American technology; and sometimes outright theft.
Critics have long asserted that China runs roughshod over intellectual property rights. But Trump, who ran for the White House on a vow to force China to reform its trade policies, is the first U.S. leader to risk a trade war between the world’s two biggest economies.
“We’ve been in a trade war for a long time, but we weren’t participating,” said Richard Ellings, president of the National Bureau of Asian Research. “We’ve awakened. This is a fundamental change. It’s a historic moment.”
Critics argue, though, that while Trump has picked the right fight, he has chosen the wrong weapon. They predict China will defy an array of U.S. tariffs set to take effect Friday and will retaliate immediately. And they warn that the escalating trade war will slow global growth and jeopardize the second-longest economic expansion in U.S. history.
Many analysts say the United States should have enlisted key allies such as Japan and the European Union — which share U.S. complaints about Chinese trade policies — to impose unified pressure on Beijing. Instead, the U.S. is engaging in trade disputes with its friends over imported steel, aluminum and autos.
“There is no way to meaningfully influence Chinese behaviour on intellectual property without co-ordination among like-minded advanced nations, and presently there is almost none,” said Daniel Rosen of the economic research firm Rhodium Group.
Barring a last-minute breakthrough, the Trump administration will impose tariffs this week on $34 billion in Chinese products that have benefited from China’s strong-arm policies.
Once Beijing responds with retaliatory tariffs, as it has said it will, the combat could escalate. Trump has said he is prepared to slap taxes on up to $450 billion in Chinese imports, or nearly 90 per cent of the goods China shipped to the United States last year.
Peter Navarro, the White House trade adviser, has said the United States needs to protect its high-tech “crown jewels” from predatory Chinese practices.
The stakes go beyond the economy. Many of today’s advanced technologies have military uses.
“Today, the acquisition of a Silicon Valley startup or even a health care provider may raise just as serious concerns from a national security perspective as the acquisition of a defence or aerospace company,” assistant U.S. treasury secretary Heath Tarbert told Congress in April.