The US Trade Representative's (USTR) office plans to propose 25pc tariffs on about $50bn/yr of Chinese imports into the US as both countries step up talk of a trade war.
The USTR will target aerospace, information and communication technology, and machinery for tariffs. The decision follows a directive yesterday by President Donald Trump to find ways to counter China's "economic aggression" — a phrase the US administration has begun to use to describe what it views as unfair trade practices by Beijing.
The $50bn threshold reflects conclusions by a team of experts and economists hired by the USTR, which estimates that China's policies result in harm to the US economy of at least $50bn/yr. Trump yesterday suggested $60bn was a more appropriate figure. Imports of goods from China into the US totaled $506bn in 2017.
Senior Republicans in Congress have pushed back against tariffs, warning they could undercut the economic effects of the tax cuts enacted last year. But the action earned Trump rare praise from congressional Democrats.
Republicans also point out that trade war could hurt the administration's US push to promote energy exports. The US exported 224,000 b/d of crude to China last year — 20pc of total exports, Energy Information Administration data show. China also accounted for about 15pc of US LNG exports.
"China does not want to fight a trade war, but it is absolutely not afraid of a trade war," China's commerce ministry said.
The US tariff action is not imminent, allowing the two governments to negotiate.
USTR has 15 days to publish a list of products subject to the 25pc duty. The proposal would have to go through a 30-day public comment period, followed by a public hearing at an undetermined date. USTR only then will make a determination on the tariff action.
China separately is a target for Trump's directive to impose a 25pc tariff on imported steel and a 10pc tariff on aluminum. The measure was originally intended to apply to all importers. But the administration has issued carve outs for Canada and Mexico and is negotiating similar exclusions for Australia, Argentina, Brazil, the EU and South Korea.
China today said it will impose tariffs on 128 imports from the US, including modified ethanol and some metal products, in response to the steel and aluminum tariffs.
Trump has focused on China because of the size of the trade deficit between the two countries. The US imported $375bn more than it exported to China last year. Trump said he wanted to cut the size of the trade deficit by $100bn.
Trump's national security strategy unveiled last year portrayed a world in which the US faces unfair economic competition but can fight back with increased energy production. China was listed as a key strategic competitor in that document.
That designation and Trump's action yesterday are a "seismic shift from an era dating back to Nixon and Kissinger," a senior administration official said. Trump's predecessors viewed "China in terms of economic engagement designed to bring China in as a nation more democratic and free, and respecting market principles," but that process has failed, the official said.
Reforms enacted by China's president Xi Jinping this month are meant to increase reliance on market for price formation. China will downgrade its top economic planning body, the National Development and Reform Commission, as part of a shake-up of government ministries. The agency is likely to lose its power over oil products pricing in the longer run as Beijing plans to liberalize prices.
