2 Aug 2018

Donald Trump ratchets up trade war with China

4:07 pm on 2 August 2018

US President Donald Trump sought to ratchet up pressure on China in the ongoing trade war by proposing to more than double tariffs on $US200 billion ($NZ294 billion) worth of Chinese goods.

US President Donald Trump speaks in Kansas City, Missouri.

US President Donald Trump's administration is proposing a higher 25 percent tariff on Chinese goods. Photo: AFP

As the trade dispute between the world's two largest economies enters its second month, Mr Trump's administration said it was proposing a higher 25 percent tariff, up from the previously proposed 10 percent in July.

US Trade Representative (USTR) Robert Lighthizer said Mr Trump directed the increase because China refused to meet US demands and has imposed retaliatory tariffs on US goods.

"The increase in the possible rate of the additional duty is intended to provide the administration with additional options to encourage China to change its harmful policies and behavior and adopt policies that will lead to fairer markets and prosperity for all of our citizens," Mr Lighthizer said in a statement.

There have been no formal talks between Washington and Beijing for weeks over Mr Trump's demands that China make fundamental changes to its policies on intellectual property protection, technology transfers and subsidies for high technology industries.

Two Trump administration officials told reporters on a conference call that Mr Trump remained open to communications with Beijing and that through informal conversations the two countries were discussing whether a "fruitful negotiation" was possible.

"We don't have anything to announce today about a specific event, or a specific round of discussions, but communication remains open and we are trying to figure out whether the conditions present themselves for a specific engagement between the two sides," one of the officials said.

Higher rates needed says academic

Derek Scissors, a China scholar at the American Enterprise Institute in Washington, said a 25 percent tariff rate was more likely to shut out Chinese products and shift American supply chains to other countries, while a 10 percent duty could be offset by government subsidies and weakness in China's yuan currency.

"If we're going to use tariffs, this gives us more flexibility and it's a more meaningful threat," he said.

Mr Trump's pressure strategy would not work if he did not resolve trade disputes with US allies such as the European Union, Mexico and Canada, he said.

But the move drew swift condemnation from US business lobby groups worried that tit-for-tat tariffs would start to hamper economic growth.

"Escalating tariffs against China is the wrong approach to address legitimate concerns US businesses have with China's harmful practices," said Myron Brilliant, head of international affairs for the US Chamber of Commerce.

"Each tariff escalation leads to further retaliatory action from China - ultimately inflicting even more harm on American businesses, workers, farmers, ranchers, and consumers."

Dog food to furniture

The higher tariff rate, if implemented, would apply to a list of goods valued at $US200bn identified by the USTR last month as a response to China's retaliatory tariffs on an initial round of US tariffs on $US34bn worth of Chinese electronic components, machinery, autos and industrial goods.

Mr Trump has ultimately threatened tariffs on more than $US500bn in Chinese goods, covering virtually all US imports from China.

The USTR said it would extend a public comment period for the $US200bn list to 5 September from 30 August due to the possible tariff rate rise.

The list, unveiled on 10 July, hits American consumers harder than previous rounds, with targeted goods ranging from Chinese tilapia fish and dog food to furniture, lighting products, printed circuit boards and building materials.

China said "blackmail" would not work and that it would hit back if the United States took further steps hindering trade, including applying the higher tariff rate.

"US pressure and blackmail won't have an effect. If the United States takes further escalatory steps, China will inevitably take countermeasures and we will resolutely protect our legitimate rights," Chinese Foreign Ministry spokesman Geng Shuang said.

Investors fear an escalating trade war between Washington and Beijing could hit global economic growth, and prominent US business groups, while weary of what they see as China's mercantilist trade practices, have condemned Mr Trump's aggressive tariffs.

Congress push-back

Mr Trump also got more push-back on his tariff plans from the US Congress as a bipartisan group of senators, led by Republican Rob Portman, launched new legislation that would scale back the president's power to impose tariffs for national security reasons under a Cold War-era trade law.

The proposal would require a more robust justification from the Department of Defense for "Section 232" tariffs such as those imposed on steel and aluminium imports and those now under consideration for autos. It would also give Congress more oversight of the process.

The move signalled displeasure among Mr Trump's own party over his protectionist actions, but chances of it becoming law were slim as Congress would likely need to override a presidential veto by Mr Trump.

- Reuters

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