Trump launches tariff action against China: Update

Adds details on tariffs

US president Donald Trump's administration today escalated its trade dispute with China, imposing broad tariffs and prompting retaliation from Beijing that could affect some US energy exports.

The 25pc US tariff will apply on $34bn/yr of imports beginning on 6 July, selected from an assortment of 818 industrial and technology product categories. The US Trade Representative's (USTR) office eliminated some items from the list it proposed in March, in response to lobbying by US companies.

But the USTR today proposed another 284 categories for a 25pc tariff, worth another $16bn/yr. Tariffs on these products will kick in following a public hearing process later this summer.

The goal is to target $50bn/yr of imports from China - a number based on an assessment of economic harm the US says it has suffered as a result of "unfair practices related to the acquisition of American intellectual property and technology" and restrictions on US companies' operations in China.

The items on the additional, yet-to-be-finalized list, include locomotives, electric vehicle storage batteries, integrated circuits and other items that the USTR says benefit from Chinese industrial policies.

The two countries have held high-level talks in recent weeks to prevent the dispute from escalating. Beijing has pledged to reciprocate with its own 25pc tariff on 106 items imported from the US, including propane and some petrochemical products.

The Chinese commerce ministry, following Trump's announcement, said it will proceed with the retaliatory tariffs. "China does not want to fight a trade war. But China has to respond strongly, in the face of the short-sighted behavior by the US," the ministry said.

Bilateral trade negotiations last month yielded a preliminary agreement from Beijing to boost exports of oil, LNG and other energy commodities from the US to $50bn-$60bn/yr from about $8bn last year. But the Chinese commerce ministry said today that the US decision invalidates "all the economic and trade achievements" discussed in recent trade talks.

"The US will pursue additional tariffs if China engages in retaliatory measures," Trump said today. But he added that he is still willing to negotiate with Chinese president Xi Jinping, "a wonderful friend."

The tariff action announced today, the planned Chinese retaliation and additional US measures could eventually encompass $150bn/yr of mutual trade. The prospect of an escalating trade war is worrying US oil and natural gas producers.

The decision to proceed with tariffs followed a discussion among Trump's cabinet members yesterday at the White House. The president's team is split on the need for tariffs. Treasury secretary Steven Mnuchin led the first round of talks with China, announcing last month that the countries would put the trade war on hold and negotiate an increase in exports of US energy and agricultural commodities. But Trump overruled him, sending commerce secretary Wilbur Ross to China to press for specific commitments, even though US officials said it would take months to work out details.

US companies, industry groups and Republican members of Congress voiced opposition to the tariffs but expressed support for Trump's policy of tackling what the US broadly views as unfair trade practices. "Imposing tariffs places the cost of China's unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers, and ranchers. This is not the right approach," US Chamber of Commerce president Tom Donohue said today.

"I am concerned that these new tariffs will, instead, hurt American manufacturers, farmers, workers, and consumers," House of Representatives Ways and Means Committee chairman Kevin Brady (R-Texas) said today.

And Trump's former economic adviser Gary Cohn warned that the tariff action would diminish the positive effect of the tax cuts enacted late last year. "We are a consumer-driven economy, so if you start putting tariffs on products that consumers buy, they are going to buy less products. They are going to have to make tough decisions, or they are going to go into further debt. We have seen what happens when consumers go into debt."

But Trump pushed back against the criticism of his action on China, and his decision to impose tariffs on imported steel and aluminum from the EU, Canada and Mexico.

"We need protection - everyone is taking advantage of us," Trump said today.