(Bloomberg)—The U.S. released a list dominated by high-tech industrial products as targets for proposed tariffs on $50 billion worth of imports, aiming to recoup losses from China’s alleged abuse of intellectual property.
Beijing said it would retaliate in equal measure. Deputy ministers from both Commerce and Finance ministries are due to hold a press briefing at 4:30 p.m. Beijing time Wednesday.
In deciding which products to hit, U.S. officials identified 1,300 product lines that benefit unfairly from government industrial policies, including Beijing’s Made in China 2025 plan to to dominate key strategic technologies, the U.S. Trade Representative’s office said.
China’s Ministry of Commerce on Wednesday said it would immediately appeal to the World Trade Organization and was “ready to take counter measures on U.S. products with the same intensity and scale.”
In targeting sectors that Beijing is openly trying to promote, the U.S. is signaling that its strategic aim in the current conflict is preventing China from gaining the global technological leadership that it wants. That has provoked anger in China, while analysts voiced doubt that the tariffs will succeed in changing Beijing’s behavior.
The tariffs may have only a minor economic impact, increasing levies by $12.5 billion on Chinese shipments to the U.S., which came to $506 billion last year, said Shane Oliver, the head of investment strategy at AMP Capital Investors Ltd. in Sydney. That’s an average tariff increase on overall imports from China of just 2.5%, he said.
“The main risk is that China’s response leads to a counter retaliation by the U.S. and a process of escalating tariffs that leads to a sharp slowing in trade between the two countries,” said Oliver.
Asian stocks were mixed as traders awaited a more detailed response from China to the latest escalation of trade tensions between the world’s two-largest trading nations. The Shanghai Composite Index rose.
Industries including aerospace, information and communications technology, robotics and machinery are among those targeted by the USTR, which said it also chose products to minimize the impact on the U.S. economy and consumers.
In addition to advanced technologies such as communication satellites, the list includes things ranging from various types of steel to television components, medical devices, dishwashers, snow blowers and even flame throwers.
“The U.S. has this vicious intention to strangle China’s high-tech innovation,” said Wei Jianguo, former vice commerce minister and now an executive deputy director of the China Center for International Economic Exchanges, a government-linked think tank. “China won’t submit to the U.S. bully. Our countermeasures will hit their soft spots.”
The U.S. duties will likely provoke a strong response from China, said Carlos Gutierrez, U.S. commerce secretary under former President George W. Bush.
“Wars start with battles, and the battles have started,” Gutierrez, co-chair of the consulting firm Albright Stonebridge Group, said in an interview in Mexico City. Chinese President Xi Jinping “can’t afford to look like he’s getting pushed around.”
Economists’ thoughts
“The U.S. proposal on tariffs aims to hit China’s industrial ambitions without hurting U.S. consumers,” said Tom Orlik, chief Asia economist at Bloomberg Economics in Beijing. “On both objectives, it will likely fall short. In sum—we think the macro impact will be limited and the strategic objectives difficult to achieve.”
The release of the list by U.S. Trade Representative Robert Lighthizer leads into a roughly 60-day period when the public can provide feedback and the government holds hearings on the tariffs. The 25% tariffs come on top of any existing levies.
Some business groups immediately denounced the proposed tariffs. “The administration is rightly focused on restoring equity and fairness in our trade relationship with China. However, imposing taxes on products used daily by American consumers and job creators is not the way to achieve those ends,” said Myron Brilliant, head of international affairs at the U.S. Chamber of Commerce.
An organization representing U.S. technology companies, including Amazon.com Inc. (No. 1 in the Internet Retailer 2017 Top 500) and Intel Corp., urged the Trump administration to work with other countries to “address systemic issues with China.”
“If history is any indication, these proposed tariffs will not work and will be entirely counterproductive,” said Dean Garfield, CEO of the Information Technology Industry Council. “Tariffs penalize U.S. consumers by increasing prices on technology products and will not change China’s behavior.”
The Retail Industry Leaders Association (RILA) expressed similar concerns about tariffs targeted at appliances, TVs and other consumer products would increase prices for U.S. consumers.
“Tariffs on everyday consumer products will hit American wallets, not Chinese technology violators, and the presumption that any of these targeted products could be reasonably sourced elsewhere ignores the complexity of modern global value chains,” said Hun Quach, vice president of international trade for RILA.
The National Retail Foundation said it was pleased products such as apparel were excluded, but it expressed concern at proposed duties on consumer electronics and household appliances.
“While we are pleased that many everyday products such as clothing and shoes are not on the list, we remain concerned that other goods such as consumer electronics and home appliances are targets,” said NRF president and CEO Matthew Shay. “Tariffs on certain machinery will make American-made products more expensive.”
However, a group representing manufacturers and steelworkers applauded the move. “The administration’s proposed actions will help restore some balance with China, as well as re-create an environment where some of the millions of jobs we’ve lost to China will have a chance of being restored,” said Scott Paul, president of the Alliance for American Manufacturing.
Penalizing Beijing
U.S. President Donald Trump’s recent trade actions, which also include slapping duties on steel and aluminum, have provoked concerns of a global trade war. China imposed tariffs of its own in response to Trump’s actions on metal imports.
China’s Made in China 2025 plan was announced in 2015 and highlighted 10 sectors for support on the way to China becoming an advanced manufacturing power, from information technology, to robotics and aerospace. In addition, China has a separate development strategy for artificial intelligence, published in 2017.
USTR said the public can submit written comments on the tariffs until May 11, and it will hold a public hearing on them on May 15 in Washington.
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