White House reboots China trade war with tariffs announcement

The Trump administration said it would proceed with tariffs on $50 billion in Chinese imports and broader investment restrictions, rebooting a trade war with Beijing that it claimed was "on hold" less than two weeks ago.

The new tariffs, to be formally unveiled in two weeks, are intended to punish Beijing for what President Donald Trump has argued is a systematic campaign by China to steal US technology.

The announcement came as US commerce secretary Wilbur Ross prepared to lead a delegation to Beijing this week and as critics in Congress assailed Mr Trump for having declared that he would soften punishment on ZTE, the Chinese telecoms group, after a request by President Xi Jinping.

The measures had first been promised in March when Mr Trump announced the results of an investigation into China’s intellectual property practices and what foreign businesses and the US say is the common practice of forcing investors to hand over technologies as a cost of entry to the Chinese market.

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‘On hold’

But US treasury secretary Steven Mnuchin subsequently declared this month that the US and China had agreed to put their trade war "on hold" while they negotiated a package of new Chinese purchases and other measures.

Mary Lovely, a Syracuse University economics professor and fellow at the Peterson Institute for International Economics, said the news was likely to catch Beijing by surprise and marked an escalation in pressure by Washington.

“It looks like typical Trump ‘I’m going to raise the ante just as my guy is going in’ kind of stuff,” she said.

Scott Paul, president of the Alliance for American Manufacturing, an advocacy group funded by the US steel industry and unions, said he hoped the White House statement would bring an end to the "mixed signals we've seen from the Trump administration on China".

“Punitive tariffs are always a last resort, but if Beijing is unable or unwilling to stop intellectual property theft and other unfair trade practices that cost American workers jobs and American businesses hundreds of billions of dollars every year, tariffs are the best leverage we have,” he said.

Final list

In Tuesday’s announcement, the White House said it would release a final list of $50 billion in US imports from China to be targeted for new tariffs on June 15th and would impose them shortly thereafter.

It promised to do the same by June 30th with new investment restrictions aimed at limiting Beijing’s ability to buy US technology companies.

Mr Mnuchin has faced criticism from China hawks inside and outside the administration that he has been too focused on striking a deal aimed at narrowing the US’s $337 billion annual trade deficit with China rather than forcing long-term reforms in China.

Mr Trump has also been attacked by both Republicans and Democrats in Congress over the deal with ZTE. The group faced a total ban on sourcing US components after it was caught both violating US sanctions on Iran and North Korea and the terms of a subsequent plea agreement.

Marco Rubio, the Republican senator who has been leading opposition to the ZTE deal in Congress, is pushing to pass veto-proof legislation that would block the Trump administration deal. He has repeatedly pointed to concerns expressed by the US intelligence community over ZTE and Huawei, its Chinese rival.

“Why should we allow any China telecom to operate in or buy sensitive technology from US when [the Pentagon] says Huawei & ZTE devices ‘pose an unacceptable risk’ to military & [US intelligence agencies] openly say they are a potential security risks to the American people?” Mr Rubio tweeted on Tuesday. – Copyright The Financial Times Limited 2018