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Economics

Trump targets China with more tariffs

Trump slaps tariffs on US$200b of Chinese goods in sharp escalation of trade war.


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Updated: September 18, 2018

United States President Donald Trump on Monday (Sept 17) defied warnings and escalated the trade confrontation with China, hitting the country with tariffs starting next week on another US$200 billion (S$275 billion) in imports and threatening to target even more if Beijing retaliates.

He said China had refused to change the unfair practices that hurt US businesses and workers.

“For months, we have urged China to change these unfair practices and give fair and reciprocal treatment to American companies,” Mr Trump said in a statement.

“These practices plainly constitute a grave threat to the long-term health and prosperity of the United States economy,” he said. “But, so far, China has been unwilling to change its practices”, including theft and force transfer of technology.

Once the new round of tariffs takes effect on Sept 24, punitive duties will be in place on roughly half of the products the US buys from China – its largest source of imported merchandise.

The latest round of imports will face 10 per cent tariffs through the end of the year, and then the rate will jump to 25 per cent.

Chinese Vice-Premier Liu He, President Xi Jinping’s top economic adviser, is set to convene a meeting in Beijing on Tuesday (Sept 18) morning to discuss the government’s response, according to a person briefed on the matter.

China’s Foreign Ministry has already vowed to strike back. “If the US launches any new tariff measures, China will have to take countermeasures to firmly ensure our legitimate rights and interests,” its spokesman Geng Shuang told reporters during a regular press briefing on Monday.

Markets traded nervously, with the yuan lower against the dollar, Chinese shares mixed and S&P futures weaker.

But Mr Trump warned that “if China takes retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately US$267 billion of additional imports”. That would mean imposing new taxes on all of the goods the US imports from China.

“Once again, I urge China’s leaders to take swift action to end their country’s unfair trade practices,” Mr Trump said. “Hopefully, this trade situation will be resolved, in the end, by myself and President Xi of China, for whom I have great respect and affection.”

SMART WATCHES SPARED

The United States will spare Apple’s Watch and other consumer gadgets from the latest round of tariffs on Chinese goods, a senior administration official said in a last-minute reprieve for the technology industry on Monday (Sept 17).

The administration’s proposal for the tariffs on US$200 billion of products drew protest from technology companies earlier this year, but the final list of taxed devices described by the official avoids many big consumer brand names and products.

Smart watches and devices that use Bluetooth wireless communications, the technology behind Apple’s AirPods and other products that work with smartphones, will be excluded from the new tariff list.

In an earlier round of tariffs on US$50 billion of goods, the Trump administration removed proposals on flat-panel television sets for the final list in June.

The new list would spare fitness trackers from Fitbit, which had said in a comment letter to regulators that the tariffs would compromise its own investment in the US.

However, some products that help computer networks operate, such as routers, will remain on the new list, the official said. That could affect smaller technology firms such as Eero, a start-up company that makes home routers and had asked to be exempted from the tariffs.

Altogether, about 300 product categories were given reprieves, including some non-tech consumer devices such as bicycle helmets and baby car seats.

US INDUSTRY, RETAIL GROUPS SLAM ‘RECKLESS’ MOVE

The US Trade Representative’s office eliminated 297 product categories from the proposed tariff list, along with some sub-sets of other categories, but administration officials said the total value of the revised list would still be “approximately US$200 billion”.

A broad, US$23-billion category of Internet-connected devices will remain subject to tariffs, but some products, such as smart watches, Bluetooth devices, and other consumer-focused technology products were removed following a lengthy public vetting period, during which more than 6,000 comments were received.

Also spared from the tariffs were Chinese inputs for US-produced chemicals used in manufacturing, textiles and agriculture.

Consumer safety products made in China, such as bicycle helmets sold by Vista Outdoor and baby car seats and playpens from Graco Inc also were taken off the list.

But the adjustments did little to appease technology and retail groups, who argued that the tariffs would hit consumers hard.

“President Trump’s decision to impose an additional US$200 billion is reckless and will create lasting harm to communities across the country,” said Mr Dean Garfield, president of the Information Technology Industry Council, which represents major tech firms.

The Retail Industry Leaders Association (Rila) pointed out that the new tariffs would still hit more than US$1 billion worth of gas grills from China, $843 million worth of luggage and travel bags, US$825 million worth of mattresses and US$1.9 billion worth of vacuum cleaners.

“Tariffs are a tax on American families, period,” said Ms Hun Quach, Rila’s vice-president for international trade. “Consumers – not China – will bear the brunt of these tariffs and American farmers and ranchers will see the harmful effects of retaliation worsen.”

Republican US lawmakers urged the Trump administration to pursue negotiations with China to resolve trade differences, while applauding Mr Trump’s tough stance on Chinese intellectual property and trade practices.

“The sooner President Xi and President Trump meet to craft a new trade path forward, the better,” said Representative Kevin Brady, chairman of the House Ways and Means Committee.



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