Northwest Arkansas Democrat-Gazette
China trade fight heats up
Soybeans on Beijing’s retaliatory tariffs list
The U.S. and China moved to the brink of a trade war on Friday after President Donald Trump’s administration announced tariffs on Chinese imports would take effect in three weeks and pledged additional investment restrictions, prompting an immediate vow of retaliation from Beijing.
China will impose tariffs with the “same scale and intensity” on imports from the U.S., and all of China’s earlier trade commitments are now off the table, according to government statements. U.S. goods scheduled for levies include farm products such as soybeans, a potential blow to rural states that backed Trump’s election in 2016.
Trump on Friday pledged more tariffs if China follows through on the retaliation threats, without specifying
an amount. In April, he asked officials to consider an additional $100 billion in levies. Meanwhile, U.S. Trade Representative Robert Lighthizer said an announcement on U.S. investment restrictions on China will follow in the next two weeks.
The first wave of 25 percent tariffs will hit $34 billion in goods and take effect July 6, with another $16 billion still to be reviewed, Lighthizer said in a separate statement.
The trade representative’s final list includes 1,102 product lines, down from about 1,300 initially, mainly focused on the Made in China 2025 plan to become dominant in high-technology industries.
The Trump administration has sought to protect consumers from a direct impact from the tariffs. The tariffs target mainly Chinese industrial machinery, aerospace parts and communications technology; they spare such consumer goods as smartphones, toys and clothes that Americans purchase by the truckload from China. Televisions and pharmaceuticals were removed from the original tariff list.
Still, these tariffs will impose higher costs on U.S. companies that use the equipment. And over time, those costs could be passed on to consumers.
“Our hope is that it doesn’t lead to a rash reaction from China,” Lighthizer said in an interview on Fox Business Network on Friday. “We hope that this leads to further negotiations and we hope it leads to China changing its policies, at least with respect to us, and opening up their market.”
Early today in China, the nation’s Finance Ministry issued a list of 545 product categories, also covering about $34 billion in exports from the U.S., to be subject to an additional 25 percent tariff starting July 6. They included a variety of agricultural products, including soybeans, corn and wheat along with beef, pork and poultry, plus automobiles. A second set of tariffs to begin at a later date spanned other goods including coal, crude oil, gasoline and medical equipment.
“It is deeply regrettable that in disregard of the consensus between the two sides, the U.S. has demonstrated flip-flops and ignited a trade war,” said Lu Kang, a spokesman for China’s Ministry of Foreign Affairs, according to the official Xinhua news agency. “This move not only hurts bilateral interests but also undermines world trade order. The Chinese side firmly opposes that.”
Trump defended his decision Friday, saying the U.S. requires a fairer trade relationship with China as he played up his personal friendship with Chinese President Xi Jinping.
“Look, he’s my friend, President Xi. He’s a great man, he’s a wonderful guy, but at some point we have to straighten it out,” Trump said in an interview on Fox News. “So much of our secrets — you know, we have the great brainpower in Silicon Valley. And China and others steal those secrets, and we’re going to protect those secrets. Those are crown jewels for this country.”
U.S. and European stocks fell and bonds gained on the news.
REACTION IN U.S.
Criticism from the American business community came swiftly.
“Imposing tariffs places the cost of China’s unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers, and ranchers. This is not the right approach,” Thomas Donohue, president of the U.S. Chamber of Commerce, said in a statement.
The U.S. imported $506 billion of goods from China last year and exported about $130 billion, leaving a 2017 deficit of $376 billion, according to government figures.
Farm commodities have been a key battleground in the trade war between the world’s two biggest economies. In April, the Asian nation started levying additional taxes on American fruit, nuts, pork and wine in response to Trump tariffs on steel and aluminum.
In 2017, China’s agriculture imports from U.S. were worth $24.1 billion, the People’s Daily reported on May 24, citing customs data. That’s about 19 percent of total farm imports worth $125.86 billion, according to Ministry of Agriculture and Rural Affairs data.
American soybean farmers, who send about 60 percent of their exports China, are especially worried about Beijing’s retaliation. Soybean prices were already falling before Friday’s announcement.
Prices will likely drop further should the tariffs be imposed,” says Bill Shipley, president of the Iowa Soybean Association. “This will further pressure agricultural families and businesses already struggling with below break-even commodity prices.”
Trump had appeared to be taking a more conciliatory approach with China before Friday. His top economic advisers had held weeks of high-level negotiations to ease tensions, with China offering to boost purchases of American goods by $25 billion.
The coal tariffs strike at the heart of Trump’s energy agenda. Since he was elected, he has been trying to make good on a campaign promise to revive America’s coal industry. The tariffs also come as U.S. miners have grown increasingly dependent on foreign markets for growth. U.S. coal exports jumped by 61 percent in 2017 as shipments to Asia more than doubled.
A few weeks ago, China was looking at buying more from the U.S. While it’s pursuing a long-term goal of using less coal, the country still produces, consumes and imports more than any other nation. The U.S. exported about 3.2 million short tons to China last year, data from the Energy Information Administration show.
China has been a key recipient of American oil since a 40-year U.S. ban on exports was ended by then-President Barack Obama in 2015. The Asian nation is helping drive a surge in exports from the U.S. — China imported 18.4 million barrels of American crude and oil products in March, making it the third-biggest customer behind Mexico and Canada.
The White House move is a response to the trade representative’s investigation earlier this year that accused China of stealing U.S. intellectual property in an effort to dominate the development of advanced technology.
Before Friday, the Trump administration had imposed tariffs on steel and aluminum imports, along with solar panels and washing machines. Economists expect the direct impact on the U.S. economy to be modest. But if the president follows through on all the duties he has threatened, including the tariffs against China, U.S. inflation could accelerate by 15 basis points, according to Goldman Sachs Group Inc. Information for this article was contributed by Andrew Mayeda, Jenny Leonard, Katherine Greifeld, Peter Martin ,Yinan Zhao,Alexander Kwiatkowski and Huang Zhe of Bloomberg News; by Neil Irwin of The New York Times; and by Paul Wiseman of The Associated Press.