China said it doesn’t fear a trade war with the U.S. and announced plans for reciprocal tariffs on $3 billion of imports from the U.S. in the first response to President Donald Trump’s ordering of levies on Chinese metal exports.
China plans tariffs on imports of U.S. pork imports, recycled aluminum, steel pipes, fruit and wine, according to a Commerce Ministry statement on Friday. China will also pursue legal action against the U.S. at the World Trade Organization in response to the U.S. planned tariffs on steel and aluminum imports, the statement said, and called for dialog to resolve the dispute.
The announcement came hours after Trump instructed U.S. Trade Representative Robert Lighthizer to slap tariffs on at least $50 billion in Chinese imports. That was in addition to the metals duties ordered earlier this month on China and other countries. The news sent U.S. equities tumbling, with the Dow Jones Industrial Average falling 724 points, almost 3 percent, its biggest drop in six weeks. All major indexes in Asia also fell on Friday.
The U.S. will impose 25 percent duties on targeted Chinese products to compensate for the harm caused to the American economy from China’s policies, according to a fact sheet released by USTR. The proposed product list will include items in aerospace, information and communication technology and machinery. The USTR will announce the proposed list in the next “several days,” according to the fact sheet.
“This has been long in the making,” Trump said, adding that the tariffs could affect as much as $60 billion in goods. “We have a tremendous intellectual property theft situation going on” with China affecting hundreds of billions of dollars in trade each year, he said.
As he signed the tariffs order, Trump told reporters, “This is the first of many.”
Policy makers across the world are warning of a brewing trade war that could undermine the broadest global recovery in years. Meanwhile, business groups representing companies ranging from Walmart Inc. to Amazon.com Inc. are warning U.S. tariffs could raise prices for consumers and sideswipe stock prices.
Even central banks, which normally stay above the fray of trade spats, are weighing in. “A number of participants reported about their conversations with business leaders around the country and reported that trade policy has become a concern,” Federal Reserve Chairman Jerome Powell said this week, while cautioning that trade issues haven’t changed the Fed’s outlook. The Bank of England warned Thursday that increased protectionism could have a “significant negative impact” on global growth.
Trump also directed Treasury Secretary Steven Mnuchin to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the U.S. views as strategic, said senior White House economic adviser Everett Eissenstat.
The initial Chinese response may not be as severe as many fear but the conflict could easily escalate, said Robert Manning, an expert on U.S.-China relations at the Atlantic Council in Washington.
“What you’re probably going to get from the Chinese is a low-key response to try to negotiate their way out of it,” Manning said. "I just worry if it gets really ugly, they may go for the nuclear option.”
He says nuclear option would be to sell a "couple hundred billion" in U.S. Treasuries, which would tank markets and raise U.S. interest rates.
Before the tariffs become final, there will be a 30-day comment period, the White House said. Trump also directed his officials to pursue a World Trade Organization complaint against China for discriminatory licensing practices.
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