US To Hit China With More Tariffs This Week

The Trump administration this week will unveil a list of advanced technology Chinese imports targeted for US tariffs to punish Beijing over technology transfer policies, a move expected to intensify trade tensions between the world’s two largest economies just days after Beijing announced retaliatory measures for an earlier round of tariffs.

US tariffs on US$50 billion to US$60 billion worth of annual imports are expected to be levied on products benefiting from Beijing’s “Made in China 2025” industrial development program, but it may be more than two months before the import curbs take effect, administration officials have said.

The US Trade Representative’s office needs to unveil the list of products by Friday under President Donald Trump’s China tariff proclamation signed on March 22.

The tariffs are aimed at forcing changes to Chinese government policies that USTR says results in the “uneconomic” transfer of US intellectual property to Chinese companies.

The agency’s “Section 301” investigation authorizing the tariffs alleges China has systematically sought to misappropriate U.S. intellectual property through joint venture requirements, unfair technology licensing rules, purchases of US technology firms with state funding and outright theft.

China has denied that its laws require technology transfers and has threatened to retaliate against any US tariffs with trade sanctions of its own, with potential targets such as US soybeans, aircraft or heavy equipment.

On Sunday, Beijing slapped extra tariffs of up to 25 percent on 128 US products including frozen pork, as well as wine and certain fruits and nuts in response to steep U.S. tariffs on imports of aluminum and steel announced last month by the Trump administration.

Fears have arisen that the two countries will spiral into a trade war that will crush global growth.

White House trade adviser Peter Navarro said last week that Section 301 tariffs would focus on Chinese industries benefiting from the Made in China 2025 plan, which aims to replace advanced technology imports with domestic products.

“China in my view brazenly has released this China 2025 plan and basically told the rest of the world, ‘We’re going to dominate every single emerging industry of the future and therefore your economies aren’t going to have any future,” Navarro told Bloomberg Television.

“The Section 301, which is on intellectual theft and forced transfer, is specifically designed to address those kinds of things,” Navarro said.

The state-led 2025 program targets 10 strategic industries: advanced information technology, robotics, aircraft, shipbuilding and marine engineering, advanced rail equipment, new energy vehicles, electrical generation equipment, agricultural machinery, pharmaceuticals and advanced materials.

“Foreign technology acquisition through various means remains a prime focus under Made in China 2025 because China is still catching up in many of the areas prioritized for development,” USTR said in its report justifying the tariffs.

US Trade Representative Robert Lighthizer has said that preserving America’s technological edge is “the future of the US economy.”

Reports that the tariff list may also include consumer goods such as clothing and footwear drew strong protests from US business groups, which argued that it would raise prices for US consumers.

While there have been contacts between senior members of the Trump administration and their Chinese counterparts since Trump announced his intention to impose tariffs, there has been little evidence of intensive negotiations to forestall them.

“The administration is following the Japan model from the 1980s,” said a tech industry executive. “They’ll publish a Federal Register notice of tariffs on certain products, then try to reach a negotiated settlement over the next 60 days.”During his first stint at USTR in the Reagan administration, Lighthizer employed similar tactics to win voluntary Japanese export restraints on steel and autos.

Wendy Cutler, a former deputy USTR in charge of Asia negotiations, said that addressing the sweeping intellectual property allegations identified by USTR would require major changes to China’s industrial policy. A 60-day settlement may not be realistic in that case.

“I think they’ve set up a high bar for what they need to achieve, in order not to impose these types of tariffs and investment restrictions,” Cutler said. (Reuters)