Trump’s tar­iffs on China will ‘back­fire on US com­pa­nies’

The National - News - - BUSINESS - Bloomberg

US Pres­i­dent Don­ald Trump’s proposed tar­iffs would not hurt Chinese firms di­rectly and in­stead would cause more harm to Amer­i­can multi­na­tional com­pa­nies by im­pos­ing costs on their sup­ply chains, ac­cord­ing to the Peter­son In­sti­tute for In­ter­na­tional Eco­nom­ics.

Prod­ucts on the tar­iff list are largely in­puts for US pro­duc­ers, and the mea­sures would de­crease Amer­i­can com­pet­i­tive­ness, raise costs for its man­u­fac­tur­ers and disad­van­tage the coun­try’s work­ers in global mar­kets, ac­cord­ing to a re­port this week by Mary Lovely, a non-res­i­dent se­nior fel­low at Peter­son in Wash­ing­ton, and Yang Liang at Syra­cuse Univer­sity.

“The proposed tar­iffs will hit bi­lat­eral trade in fast-grow­ing, knowl­edge-based sec­tors the hard­est,” the re­searchers said. “Rather than hit­ting the ad­min­is­tra­tion’s in­tended tar­get – Chinese firms that may have un­fairly ob­tained Amer­i­can tech­nol­ogy – the proposed tar­iffs would ac­tu­ally in­flict dam­age on US high-tech­nol­ogy sec­tors.”

As Vice Premier Liu He re­turns to Wash­ing­ton this week for more trade talks, US com­pa­nies and busi­ness groups are lin­ing up against Mr Trump’s planned tar­iffs on Chinese im­ports. Ap­ple chief ex­ec­u­tive Tim Cook told Bloomberg this week he op­posed the pres­i­dent’s ap­proach to trade with China in a re­cent White House meet­ing and em­pha­sised co-op­er­a­tion.

Mr Trump said on Wed­nes­day that trade talks are just get­ting started, adding that the United States has not seen China’s list of de­mands in ne­go­ti­a­tions.

The US has threat­ened to im­pose tar­iffs on $150 bil­lion of Chinese goods af­ter al­leg­ing the coun­try vi­o­lated in­tel­lec­tual prop­erty rights, with Bei­jing say­ing it would re­tal­i­ate with im­port bar­ri­ers of its own.

US Trade Rep­re­sen­ta­tive Robert Lighthizer started to probe China’s in­tel­lec­tual-prop­erty prac­tices in Au­gust at Mr Trump’s re­quest un­der Sec­tion 301 of the 1974 Trade Act, which gives the pres­i­dent broad author­ity to im­pose tar­iffs.

Com­merce Sec­re­tary Wil­bur Ross said on Mon­day the tar­iffs would be de­signed to pro­tect Amer­i­can com­pa­nies af­ter the USTR re­port found ev­i­dence of Chinese theft and forced trans­fer of ad­vanced tech­nolo­gies.

The tar­iffs out­lined by USTR cap­ture trade in high-tech­nol­ogy goods, much of which orig­i­nates from foreign-in­vested en­ter­prises, the re­searchers wrote, cit­ing China’s cus­toms data.

Be­cause the tar­geted prod­ucts are largely cap­i­tal and in­ter­me­di­ate goods used for do­mes­tic pro­duc­tion, the tar­iffs “are taxes on man­u­fac­tur­ing in Amer­ica,” they said.

Foreign-in­vested en­ter­prises were the source of 46 per cent of to­tal Chinese ex­ports to the world in 2014 and 60 per cent of the ship­ments bound for the US, the re­searchers said, cit­ing a Zhe­jiang Univer­sity study of China cus­toms records.

For in­dus­tries that ben­e­fit more from sep­a­rat­ing in­no­va­tion and labour-in­ten­sive pro­duc­tion, such as com­put­ers and mo­bile phones, the share of ex­ports to Amer­i­can shores was even greater, they said.

Amer­i­can multi­na­tion­als like Ap­ple and Nike “fo­cus on mar­ket­ing, de­sign, and in­no­va­tion, while out­sourc­ing stages of the phys­i­cal pro­duc­tion process,” the re­searchers said. They added that US firms that turn to off­shoring use their ac­cess to in­ex­pen­sive foreign pro­duc­tion to cre­ate more higher-pay­ing as well as lower-pay­ing jobs at home.

The du­ties are “20th cen­tury tools aimed at the knowl­edge em­body­ing trade flows of the 21st cen­tury,” they said. “Beyond the im­me­di­ate dam­age to Amer­i­can com­pet­i­tive­ness, trade re­stric­tions push high-tech­nol­ogy firms to lo­cate else­where in the fu­ture. Tar­iffs can di­min­ish trade flows, but ideas are eas­ily re­lo­cated.

Amer­i­can work­ers would bear the bur­den if high-value ac­tiv­ity moves off­shore due to the ill-con­ceived tar­iffs.”

The proposed tar­iffs will hit bi­lat­eral trade in fast-grow­ing, knowl­edge-based sec­tors the hard­est PETER­SON RE­PORT

EPA

China threat­ens to place 25% tar­iffs on a list of 106 US goods, in a re­tal­ia­tory ac­tion against the new du­ties

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