The government of China announced retaliatory tariffs against the U.S. for levies signed by President Trump yesterday that raise duties on Chinese made goods entering the U.S. The President signed penalties that amount to $50 billion, and may equal as much as $60 billion, in an effort to bring the U.S.’ trade deficit, and its trade deficit with China specifically, more in balance. The President called it “the largest deficit of any country in the history of our world.”
“It’s out of control,” he added.
The taxes are aimed at intellectual property theft and violations of technology transfer agreements that have served as disadvantages for U.S. companies and disagreements. He brought the motions under Section 301 of the 1974 Trade Act which authorizes a U.S. President to take retaliatory measures against a foreign government that violates trade agreements with the U.S.
The administration will have fifteen days to release a list of Chinese goods and sectors that will be subject to the tariffs. U.S. Trade Representative Robert Lighthizer will oversee the process, and a thirty-day public comment period will follow. The White House didn’t disclose which products or industries might be affected but assured the list would be “long.”
“China is not afraid of and will not recoil from a trade war,” China’s embassy in Washington said a statement yesterday. “China would fight to the end to defend its own legitimate interests with all necessary measures,” it added.
The Chinese government’s opening response came this morning when it announced a 25% tariff on U.S. pork imports and recycled aluminum and a 15% tariff on American steel pipes, fruit and wine.
China vowed to bring cases against the U.S. at the World Trade Organization but also called for dialogue to resolve the issue. Wei Jianguo, a former vice minister and now an executive deputy director with the China Center for International Economic Exchanges, a government-linked think tank, said, “We have plenty of measures to fight back, in areas of automobile imports, soybean, aircraft and chips.”
“On the other hand, Trump should know that this is a very bad idea, and there will be no winner, and there will be no good outcome for both nations,” he added.
Several U.S. companies, including retail giant Walmart Inc and online mega-site Amazon.com warned that the U.S. tariffs could raise prices for consumer goods and also have an effect on the stock market.
Market indices dropped on news of the taxes yesterday. The Dow Jones Industrial Average lost 724 points – nearly 3% of its value. Large U.S. manufacturers like Boeing and Caterpillar took heavy losses on fears of slower economic growth and limited global expansion. The index is struggling to recover in early trading today.
President Trump made bringing the nation’s trade deficit into balance one of his main campaign promises during the 2016 presidential election. “Past presidents should never have allowed this to happen,” the President said after signing the Memorandum. “We got stuck with a lot of beauties, but we’ll fix them.”
In addition to the tariffs, the President also announced that he has asked China to reduce their trade deficit with the U.S. by $100 billion.
“The word is “reciprocal,”’ the President said at yesterday’s event. “That’s the word I want everyone to remember. We want reciprocal…If they charge us, we charge them the same thing. That’s the way it’s got to be. That’s not the way it is. For many, many years — for many decades, it has not been that way.”