Threat of trade war as US announces plan to impose tariffs worth $50 billion on China

Donald Trump prepared the ground for a full-scale trade war as he announced plans to impose tariffs worth up to $50 billion (Dh183.6bn) on China in response to the theft of US technology and anti-competitive practices.

The US president proposed tariffs of 25 per cent on Chinese imports of aerospace equipment and machinery as a punishment for what he said was unfair industrial policies.

China has indicated that it would respond with all “necessary measures” to the action by the US, setting the scene for a collision between the world’s two biggest economic powers that will have ramifications around the world.

The measures specifically target high-tech products and key industries that China hopes will drive its future economic fortunes. Mr Trump said the US would also propose restrictions on Chinese investment in sensitive US technology.

The measures were widely anticipated after the president launched an inquiry last August into Chinese trade practices and protectionism.

The inquiry concluded that China was behind the hacking of US companies to steal trade secrets and other sensitive commercial information.

A White House statement cited the 2014 case when the US charged five Chinese military hackers with cyber espionage against US businesses for commercial advantage. The inquiry also concluded that US companies were being forced into handing over technological secrets in return for access to the Chinese market.

The White House said a list of the proposed tariffs would be published within 15 days. Trade officials have already identified 1,300 products worth about $48bn.

The measures are a response to a major trade imbalance between the two counties and what Mr Trump said was the “largest deficit of any country in the history of the world”. He added: “It’s out of control.”

He said that he saw China as a friend, but was acting to prevent what he called “tremendous intellectual property theft”.

“Under my administration, the theft of American prosperity will end,” he said. “We’re going to defend our industry and create a level playing field for the American worker, finally.”

The announcement marked Mr Trump’s first trade measures aimed directly at China, which he blames for affecting the US manufacturing sector and the loss of jobs.

The announcements followed plans to impose import tariffs of 25 per cent on steel and 10 per cent on aluminium, but offered a series of exemptions to trading partners.

The measures and threats have sparked concerns of a new era of global protectionism

with countries responding with tit-for-tat measures to protect their own domestic industries.

Policymakers, including Christine Lagarde, the managing director of the International Monetary Fund, have warned that a global trade conflict could undermine the broadest world recovery in years.

Mr Trump also turned his fire on the European Union, complaining that the 28-nation trading bloc had high and unequal

tariff barriers. But the EU is expected to win an exemption on the metal tariffs.

“It could be a watershed moment,” said Stephen Ezell, vice president of global innovation policy at the Information Technology & Innovation Foundation, a think tank.

“The Trump administration’s decision to go down this path is illustrative that previous strategies have not borne the hopedfor fruit.”