US-China tariffs: What’s behind them, who stands to be hurt?

Tuesday, July 3, 2018

WASHINGTON (AP) — President Donald Trump has boldly declared that trade wars are easy to win. He’s about to find out.

Barring a last-minute breakthrough, the Trump administration on Friday will start imposing tariffs on $34 billion in Chinese imports. And China will promptly strike back with tariffs on an equal amount of U.S. exports.

And just like that, a high-risk trade war between the world’s two biggest economies will begin — one that could quickly escalate.

“I see us running into a full collision course in a few days,” said Ashley Craig, a trade lawyer at Venable LLP. “It seems as if both sides are fairly dug in.”

Here’s a look at what’s happening this week and its likely impact.

 

WHAT IS THE U.S. DOING?

The White House last month announced plans to slap 25 percent tariffs on roughly 1,100 goods imported from China, worth $50 billion a year. It had originally proposed the tariffs in April, starting with 1,333 Chinese products. After receiving public feedback, the administration cut 515 imports from the blacklist and added 284 others.

Starting Friday, the U.S. will tax 818 Chinese products, worth $34 billion a year, from the original list. It won’t target the 284 additions, worth $16 billion, until it gathers further public comments.

 

HOW IS CHINA 

RESPONDING?

China has warned that it won’t yield to Trump’s pressure. If the U.S. starts taxing Chinese imports Friday, Beijing plans to impose 25 percent tariffs on 545 U.S. products worth $34 billion a year — from soybeans and lobsters to sport-utility vehicles and whiskey. China is considering a follow-up tariff on an additional 114 U.S. goods, worth $16 billion a year.

Beijing’s target list of U.S. goods to penalize is heavy on agriculture. That’s hardly a coincidence. Its tariffs are meant to deliver pain to American farmers, who overwhelmingly backed Trump in the 2016 election and whose interests are represented by powerful lobbyists and members of Congress.

In the meantime, Trump has told his U.S. trade representative, Robert Lighthizer, to identify an additional $200 billion in Chinese goods for 10 percent tariffs. These penalties would take effect, Trump has said, if Beijing fails to reform its trade practices and proceeds with retaliatory tariffs.

The stakes could rise further yet: Trump has threatened tariffs on still another $200 billion in Chinese products if Beijing continues to retaliate.

 

WHAT’S BEHIND THE 

U.S.-CHINA RIFT?

The Trump administration has accused China of using predatory tactics in a lawless drive to overtake America’s technological supremacy. U.S. officials point to Beijing’s long-range development plan, “Made in China 2025,” which calls for creating powerful Chinese entities in such areas as information technology, robotics, aerospace equipment, electric vehicles and biopharmaceuticals.

Foreign business groups argue that “Made in China 2025” is unfairly forcing them to the sidelines in those industries. The Office of the U.S. Trade Representative concluded after an investigation that China’s tactics range from requiring U.S. and other foreign companies to hand over technology in return for access to the vast Chinese market to outright cyber-theft. The U.S. also asserts that Beijing uses state money to buy American technology at prices unaffordable for private companies.

In May, the White House had said it would announce curbs on Chinese investment in U.S. technology by June 30 and impose those restrictions shortly thereafter. But last week, it dropped that plan.

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