Northwest Arkansas Democrat-Gazette
U.S. set to impose more China tariffs
Levy to affect 279 products lines
The U.S. said Tuesday it will begin imposing 25 percent duties on an additional $16 billion in Chinese imports in two weeks, escalating a trade war between the world’s two biggest economies.
Customs will begin collecting the duties as of Aug. 23 on 279 product lines, down from 284 items on the initial list from June, the U.S. trade representative’s office said in an emailed statement on Tuesday. The new list covers products ranging from motorcycles to steam turbines and railway cars.
It will be the second time the U.S. has imposed duties on Chinese goods in the past month, despite complaints by American companies that such moves will raise business costs and eventually consumer prices. The U.S. levied 25 percent duties on $34 billion in Chinese goods on July 6, prompting swift inkind retaliation from Beijing. China has vowed to strike back again, dollar-for-dollar, on the $16 billion levy.
The total could increase soon. The trade representative’s office is reviewing 10 percent tariffs on a further $200 billion in Chinese imports, and is even considering raising that rate to 25 percent. Those duties could be in place after a comment period ends on Sept. 5.
President Donald Trump has suggested he may tax effectively all imports of Chinese goods, which reached more than $500 billion last year.
A U.S.-China trade war will reduce global output by 0.7 percent by 2020, with China’s economy taking a 1.3 percent hit and U.S. gross domestic product dropping 1 percent, Oxford Economics said in a research note Tuesday, before the new list was released. While there’s no major risk of the world lapsing into “damaging stagflation,” the possibility remains of a “bigger blow-up” that sharply reduces trade, as in the 1930s, it said.
Over the weekend, Trump said he had the upper hand in the trade war, while Beijing responded through state media by saying it was ready to endure the economic fallout.
The U.S. and China have been trying to restart high-level talks that broke off after Trump followed through on his earlier tariff threats. Representatives of Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are having private conversations as they look for ways to re-engage in negotiations, according to two people familiar with the efforts.
The two sides held three rounds of formal talks, beginning with a delegation to Beijing led by Mnuchin in May. After Liu visited Washington later that month, the nations released a joint statement pledging to reduce the U.S. trade deficit with China, among other things. But within days, Trump himself backed away from the deal, saying talks would “probably have to use a different structure.”
Negotiations broke off after the Trump administration imposed the tariffs on $34 billion in Chinese imports, a move the Chinese said would void any promises they’d made in negotiations.
Trump’s mission to reduce the U.S. trade deficit via the threat of tariffs has brought him into conflict with China as well as U.S. allies, roiling financial markets and raising fears of a global trade war the International Monetary Fund has warned may undermine the strongest economic upswing in years.
As part of the same punitive campaign, China is about to find it much harder to invest in U.S. companies or to buy American technology in such cutting-edge areas as robotics, artificial intelligence and virtual reality.
Trump is expected as early as this week to sign legislation to tighten the U.S. government’s scrutiny of foreign investments and exports of sensitive technology.
The law, which Congress passed recently in a rare show of unity among Republicans and Democrats, doesn’t single out China. But there’s no doubt the intended target is Beijing. The Trump administration has accused China of using predatory tactics to steal American technology.
“As a policy signal, it speaks with a very loud voice,” said Harry Clark, head of the international trade practice at the law firm Orrick. “Leading decision makers and Congress are very concerned about technology transfer to China.
Trump had initially ordered the Treasury Department to draft investment restrictions aimed specifically at China. But in late June, Trump decided instead to back Congress’ effort to tighten existing investment restrictions and export controls on all countries, rather than China alone.
The new law strengthens reviews of foreign investment by the existing Committee on Foreign Investment in the United States, which is led by Mnuchin. The committee can now review any investments that grant foreigners access to a U.S. company’s hightech trade secrets. Before the change, such reviews were done only when a foreigner gained control of a company.
The new law also gives the committee oversight of real estate deals that are deemed to pose a national security risk by putting foreigners in “close proximity” to government offices and military bases. The legislation will also crack down on deals that appear structured to evade such oversight.
Congress is also directing the committee to go beyond specific cases to identify patterns in foreign investment — if, for example, Chinese companies are acquiring a specific technology — and to work with U.S. allies that share its concerns about Beijing’s high-tech ambitions.
“Treasury can now share information,” said Rod Hunter, a partner at the Baker McKenzie law firm and a former White House economic adviser. “They used to have to do all kinds of backflips and workarounds with allied governments to deal with this sort of issue.”
The new law also strengthens the Commerce Department’s oversight of high-tech exports. Government agencies will identify sensitive “emerging and foundational technologies” that will be subject to tougher export controls.
Hunter said he thought the stricter oversight of high-tech exports could potentially impose a bigger impact on China than the tariffs the Trump administration has imposed on Beijing’s exports to the United States.
Still, the new measures could burden U.S. companies that will find it harder to attract Chinese investment or to share with Chinese partners or customers technology that the U.S. government might deem sensitive.
“It could be that we’re pushing American tech firms out of China,” said Derek Scissors, China specialist at the conservative American Enterprise Institute.
The crackdown reflects a sharp reversal in U.S. attitudes toward Chinese investment. From virtually nothing in 2000, Chinese direct investment in the United States (including new plants and offices and acquisitions of American companies) reached a record $46 billion in 2016, according to the Rhodium Group research firm.
Chinese investors sank money into U.S. companies involved in artificial intelligence, robotics and blockchain technology, which is used to do business in cryptocurrencies. U.S. policymakers began to worry about what the Chinese were up to, especially after leaders in Beijing made their ambitions clear: They intend to nurture homegrown Chinese companies that will contend for global dominance in such fields as electric cars, robotics and medical devices.
In March, the office of the U.S. trade representative reported that Chinese investors were using money provided by Beijing to outbid private companies and pay above-market rates for technology and talent. And last year, a Defense Department report sounded the alarm about China obtaining technology that could have military uses.