Donald set to hit China with 60 billion in tariffs by Friday

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Donald set to hit China with 60 billion in tariffs by Friday

Post by jserraglio » Mon Mar 19, 2018 6:38 pm

Washington Post

President Trump is preparing to impose a package of $60 billion in annual tariffs against China, following through on a long-time threat that he says will punish China for intellectual property infringement and create more American jobs.
The tariff package, which Trump plans to unveil by Friday, was confirmed by four senior administration officials.
Senior aides had presented Trump with a $30 billion tariff package that would apply to a range of products, but Trump directed them to roughly double the scope of the new trade levies. The package could be applied to more than 100 products, which Trump argues were developed by using trade secrets the Chinese stole from U.S. companies or forced them to hand over in exchange for market access.
The situation remains fluid, and Trump has previously in his presidency backed off economic threats at the last minute. In recent weeks, however, he has shown a willingness to unilaterally impose tariffs — even amid objections from advisers who fear starting a global trade war.
Trump was particularly determined to follow through on tariffs on China, as criticism of U.S.-China relations was at the center of his presidential campaign, according to the administration officials, who demanded anonymity to discuss the president’s plans.
If implemented, the tariff package could draw retaliation from China, fraying the trade partnership between two of the world’s largest economies.
In 2017, China was the largest U.S. trading partner in goods (not counting services), edging out Canada and then Mexico. The United States exported $130.4 billion of goods to China, but it imported nearly four times as much, running a trade deficit of $375.2 billion, according to the U.S. Census Bureau.
Economists specializing in China said that it would be difficult for the Trump administration to target Chinese companies because products imported from China are made by multinational companies with inputs from countries throughout Asia.
China might add finishing touches or labor intensive processes, but China’s share of many of the products it exports to the United States is small, said Nicholas R. Lardy, a senior fellow at the Peterson Institute for International Economics.
“So much of what we import from China is produced by multinational companies,” Lardy said. “Thirty percent are consumer electronics. I’m sure the president doesn’t want to raise the prices of those and send Apple’s stock into the toilet.”
It will be easier for China to hit back, Lardy said, as China can zero in on U.S. exports such as soybeans, which are entirely made in America. Soybeans are one of the top two goods the United States exports to China, along with aircraft and aircraft parts.
Lardy also said that penalizing China was unlikely to help U.S. producers, even if the tariffs succeeded in stemming the inflow of goods from China.
“In the best case they might reduce imports from China by $30 billion but it will have virtually no effect on US global trade deficit,” he said. “We’ll just start buying things from the next lowest cost supplier, such as Bangladesh or Vietnam. It’s not that the $30 billion will magically be produced in the United States the day after they announce these tariffs.”
China is also the largest foreign holder of U.S. government debt. It holds $1.17 trillion of U.S. Treasury securities, down about $33.5 billion since August last year. The U.S. government faces huge borrowing needs, not only to finance new deficits but also to refinance past securities now coming due, so a drop in China’s appetite for that debt could nudge interest rates up in the United States. But experts also note that China would not want to hurt the value of the huge amount of securities it still holds, leaving the two nations’ finances in a state of mutual semi-dependency.
Beyond the escalating tensions with China, Trump’s pivot to protectionism has put much of the world on edge. His 2016 campaign was built around promises to put “America First” on every issue, but some aides managed to scale back his plans for trade restrictions in 2017 as the GOP muscled tax cuts through Congress.
That has changed this year, however, with the tax bill signed into law and some of the people who had warned against protectionism exiting the White House.
Trump earlier this month ordered tariffs on imported steel and aluminum, a move U.S. allies and trading partners met with protests and threats of retaliatory tariffs. Gary Cohn, the top White House economic adviser, opposed the metal tariffs and announced his resignation.
Republican leaders in Congress criticized the metal tariffs, but Republicans are not planning legislation to overturn them. The party is also worried Trump will withdraw the United States from the North American Free Trade Agreement, a pact the administration officials are currently renegotiating with their counterparts in Mexico and Canada.
The U.S.-China Business Council, a nonpartisan nonprofit group of 200 American companies that do business with China, strongly opposed to tariffs.
The group noted that many states – including some swing states that propelled to an unexpected victory in 2016 – have seen sharp increases in exports to China. Over the decade ending 2016, Pennsylvania’s exports of goods to China increased 83 percent, twice the rate as its exports to the rest of the world. And Pennsylvania’s exports of services jumped more than four-fold, more than five times the pace as its services exports to the rest of the world. Exports from Michigan, another state Trump won, showed a similar pattern.
Treasury Secretary Steven Mnuchin is in Buenos Aires on Monday and Tuesday meeting with global finance ministers. The foreign officials are trying to determine whether Trump plans to follow through on his threats to engage in a “trade war.”
Many of the financial ministers at the meeting have argued China should make changes to its trade policies, but so far most have tried to cajole Beijing multilaterally, a strategy that Trump has said doesn’t work.
Still, Trump’s approach to China has been uneven. He has tried to both befriend Chinese leader Xi Jinping while also isolate him, particularly on economic issues. On Sunday, the Treasury Department had to backtrack on an embarrassing misstep when a senior official said he had suspended economic talks with China, when a formal decision had not yet been made.

Damian Paletta is White House economic policy reporter for The Washington Post. Before joining The Post, he covered the White House for the Wall Street Journal.

Steven Mufson covers energy and other financial matters. Since joining The Washington Post in 1989, he has covered the White House, China, economic policy and diplomacy.

Josh Dawsey is a White House reporter for The Washington Post. He joined the paper in 2017. He previously covered the White House for Politico, and New York City Hall and New Jersey Gov. Chris Christie for the Wall Street Journal.

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