Tariffs fray US-China relations

WASHINGTON » President Donald Trump imposed tariffs Friday on $50 billion in Chinese products, signaling his willingness to unwind nearly a quarter century of growing commercial links between the world’s two largest economies unless Beijing agrees to transform the way it conducts business.

The decision marked the president’s boldest step so far to implement his “America First” strategy, which he promises will shrink the $811 billion merchandise trade deficit and return lost manufacturing jobs to the United States.

But Trump’s aggressive approach is rattling American corporate leaders and his Republican allies in Congress, as Chinese officials show no sign of capitulating.

It took little more than an hour for the Ministry of Commerce in Beijing to fire back at the president with a late-night statement pledging to erect trade barriers of the “same scale and the same strength.” China is targeting agricultural goods, cars and energy in a bid to hit the president’s supporters in farm states and the industrial Midwest.

Though the president had telegraphed his tariff plans in March, the formal White House announcement amounted to a sharp break with a generation of economic integration backed by Republicans and Democrats.

Since the mid-1990s, when China’s entry into the world trading system was first broached, multinational corporations have grown highly dependent upon Chinese factories. Over the past decade, two-way trade between U.S. and Chinese ports has grown by two-thirds to nearly $700 billion annually.

“Given China’s unwillingness to capitulate to U.S. demands, it is difficult to see a path to a negotiated settlement that avoids a big hit to trade and investment flows between the two countries,” said Eswar Prasad, former head of the International Monetary Fund’s China division. “Trump’s trade sanctions constitute a significant strike against rising global integration.”

There are other signs the two economies may not be as tightly bound in the future as they have been in the past.

The administration is expected June 30 to make public new restrictions on Chinese investment in U.S. technology industries. Chinese officials, meanwhile, have mounted a lavishly funded research and development program aimed at reducing their dependence on U.S. companies for key components such as semiconductors.

Administration officials say the tariffs are needed to compel China to modify elements of its state-led economic system that disadvantage private companies.