By Andrew Mayeda (Bloomberg) The Trump administration moved the U.S. to the edge of a trade war with China by announcing tariffs on $50 billion in Chinese imports and pledging additional investment restrictions, which Beijing immediately vowed to retaliate against.
The response from China signaled a rapid escalation of the dispute. The world’s No. 2 economy will impose tariffs with “equal scale, equal intensity” on imports from the U.S. and all of the country’s earlier trade commitments are now off the table, the Commerce Ministry said in a statement on its website late Friday. U.S. goods slated for levies include soybeans and corn, a potential blow to rural states that backed Donald Trump’s election in 2016.
Trump on Friday pledged more tariffs if China follows through on the retaliation threats, without specifying an amount. In April, he asked officials to consider an additional $100 billion in levies. Meanwhile, U.S. Trade Representative Robert Lighthizer said an announcement on U.S. investment restrictions on China will follow in the next two weeks.
“Our hope is that it doesn’t lead to a rash reaction from China,” Lighthizer said in an interview on Fox Business Network on Friday. “We hope that this leads to further negotiations and we hope it leads to China changing its policies, at least with respect to us, and opening up their market.”
The first wave of 25 percent tariffs will hit $34 billion in goods and take effect July 6, with another $16 billion still to be reviewed, the U.S. Trade Representative said in a separate statement.
The USTR’s final list includes 1,102 product lines, down from about 1,300 initially, mainly focused on China’s Made In 2025 plan to become dominant in high-technology industries such as robotics, aerospace, industrial machinery and automobiles. Consumer goods including mobile phones and televisions aren’t being hit with the tariffs.
Hours later — early Saturday in China — the nation’s Finance Ministry issued a list of 545 product categories, also covering about $34 billion in exports from the U.S., to be subject to an additional 25 percent tariff starting July 6. They included a variety of agricultural products, including soybeans, corn and wheat along with beef, pork and poultry, plus automobiles. A second set of tariffs to begin at a later date listed other goods including coal, crude oil, gasoline and medical equipment.
Trump defended his decision on Friday, saying the U.S. requires a fairer trade relationship with China as he played up his personal friendship with Chinese President Xi Jinping.
“Look, he’s my friend, President Xi. He’s a great man, he’s a wonderful guy, but at some point we have to straighten it out,” Trump said in an interview on Fox News. “So much of our secrets — you know, we have the great brainpower in Silicon Valley. And China and others steal those secrets, and we’re going to protect those secrets. Those are crown jewels for this country.”
U.S. and European stocks fell and bonds gained on the news.
By Andrew Mayeda and Jenny Leonard, Bloomberg