The Washington PostDemocracy Dies in Darkness

Trump escalates China trade war, threatens tariffs on $200 billion in products

President Trump escalated his trade war with China on June 18, and threatened to put in place tariffs on $200 billion worth of Chinese goods. (Video: Reuters)

President Trump threatened Monday to levy tariffs on nearly all of China’s products shipped to the United States unless Beijing agrees to a host of sweeping trade concessions, a dramatic escalation that would enlist American consumers in the brewing U.S.-China commercial conflict.

In a statement, Trump said he had ordered his chief negotiator, U.S. Trade Representative Robert E. Lighthizer, to draw up a list of $200 billion in Chinese products that will be hit with tariffs of 10 percent if China refuses his demands to narrow the yawning U.S. trade deficit and change its industrial policies.

The president warned that he was prepared to hit China with an additional $200 billion in import taxes unless Beijing capitulates.

Such a step would be virtually unprecedented in U.S. history and would put nearly all of the $505 billion in products that the United States imports from China under tariffs.

“The trade relationship between the United States and China must be much more equitable,” Trump said. “The United States will no longer be taken advantage of on trade by China and other countries in the world.”

The move sent Asian markets sliding to new lows with Shanghai closing down 3.78 percent, its biggest drop in two years, and Shenzhen down 5.31 percent. Hong Kong’s Hang Seng Index (HSI) closed down 2.76 percent, while Japan’s Nikkei lost 1.77 percent.

In a statement published shortly after Monday’s announcement, China’s Ministry of Commerce called the move “blackmail.”

“If the U.S. loses its senses and publishes a new list, China will be forced to take comprehensive measures that are both strong in quantity and gravity and will fight back,” it read.

The vow of retaliation was reiterated by a spokesman for the Chinese Foreign Ministry, Geng Shuang, at a daily press briefing. “We don’t want a trade war, yet we are not afraid of a trade war,” he said.

An editorial in the Global Times, a Communist Party-controlled newspaper known for its nationalist tone, said the Trump administration was “gambling” but would lose.

The president is adopting an increasingly aggressive posture in seeking to implement his “America First” trade strategy. He has threatened or imposed tariffs on all major U.S. trading partners, including China, the European Union, Mexico and Canada, in a high-stakes bid to reshape global trade in a way that reopens shuttered American factories.

Trump’s latest threat — if implemented — would dramatically expand the goods facing trade measures to a range of consumer items, forcing Americans to pay more for smartphones, computers, toys, televisions and just about every other middle-class staple.

None of the tariffs announced Monday will take effect until industries and consumers have a chance to make their views known in a 60-day public comment period.

“This is a threat that the Chinese can’t match,” said Jeff Moon, a former U.S. trade negotiator. “I see this as a major growl to get the Chinese to take his threats seriously.”

Rick Helfenbein, president of the American Apparel & Footwear Association, called the president’s decision to up the ante “hollow, vindictive and reckless” and said it would endanger the $130 billion in American exports to China.

With tariffs, Trump starts unraveling a quarter-century of U.S.-China ties

Zhu Feng, director of the Institute of International Relations at Nanjing University, called Trump’s move “childish” and “emotional.”

Zhu said China would be unable to match the measures in terms of quantity because China imports less than $200 billion of U.S. goods. He predicted other measures such as raising tariffs further.

“The trade dispute is heating up,” he said.

Administration officials believe they have the upper hand in any trade dispute with China, thanks to the larger $20 trillion U.S. economy. Since almost every American who wants work can find it, officials such as Kevin Hassett, head of the president’s Council of Economic Advisers, say that the United States is positioned to withstand any trade war costs.

Others warned that the president could stumble into a costly economic debacle.

“I think Trump is completely misreading the Chinese,” said Phil Levy, an economist who served in the George W. Bush White House. “No one who followed China closely thought a direct public threat was going to get them to change. China is fixated on appearing strong.”

The latest move came three days after Trump imposed tariffs of 25 percent on $50 billion in Chinese imports, an action aimed at compelling Beijing to change a range of industrial policies that the administration says dis­advantage foreign companies. The United States complains that China forces foreign firms to surrender their technology in return for the right to operate in China and engages in cybertheft to acquire trade secrets.

China hit back with tariffs on $50 billion in American products, including agricultural goods.

“This latest action by China clearly indicates its determination to keep the United States at a permanent and unfair disadvantage, which is reflected in our massive $376 billion trade imbalance in goods,” the president said in the statement, released by the White House at about 7:30 p.m.

Trump doubled his April threat to respond to any Chinese retaliation for his trade actions with $100 billion in additional tariffs. And he vowed to levy tariffs on a further $200 billion in Chinese goods if Beijing hit back against Monday’s action.

Trump has signaled an interest in using tariff threats to force trading partners to the negotiating table. Lighthizer employed similar tactics in the 1980s while leading American negotiators in talks with the Japanese.

But early rounds between the United States and China have made little progress, beyond a now-withdrawn Chinese offer to buy more American goods. That’s something that would cheer U.S. businesses and farmers but does little to resolve the structural forces that concern administration hard-liners. They say China seeks to acquire American technology via licit and illicit means to dominate industries of the future, such as artificial intelligence, robotics, autonomous vehicles and quantum computing.

U.S. reaches deal with ZTE that includes $1 billion fine

Trump’s latest move seems to indicate that discussions between the two sides have fizzled, according to Derek Scissors of the American Enterprise Institute.

“There is some sort of fundamental breakdown in communication,” Scissors said. “From Trump’s standpoint, the Chinese are basically flipping off the U.S. president.”

Monday night’s directive was the most expansive to date in a fast-escalating trade dispute between the world’s biggest economies that has rattled business leaders and Republicans in Congress.

The White House appeared headed for a showdown with Congress on Monday after the Senate passed legislation to reinstate a ban on the sale of U.S. components to the Chinese telecom giant ZTE.

The measure, part of the annual defense appropriations bill, which passed 85 to 10, ordered the reimposition of the punitive measures imposed on ZTE after the company pleaded guilty to violating U.S. sanctions against North Korea and Iran.

Trump had sought to roll back the measures last month as part of a deal with Chinese government leaders, arguing that the punishment against ZTE risked putting the company out of business.

But several lawmakers — including some of the president’s close allies — remain concerned that ZTE’s products pose a significant national security risk and could be used by the Chinese government to spy on the United States.

Senate leaders decided last week to include language written by two Republicans, Sens. Tom Cotton (Ark.) and Marco Rubio (Fla.), who along with Sen. Chris Van Hollen (D-Md.) and Senate Minority Leader Charles E. Schumer (D-N.Y.) offered the measure to reimpose punitive measures against ZTE in an updated version of the defense bill.

Commerce Secretary Wilbur Ross has made multiple trips to the Capitol in the meantime to plead the administration’s case with House and Senate Republicans, in the hopes of getting lawmakers to drop the provision during the upcoming conference process, in which House and Senate negotiators will try to hammer out a compromise defense bill that can pass both chambers.

Trump’s escalation is probably a response to Senate fears that he has been too soft on China in the ZTE case, said Scott Kennedy, a China expert at the Center for Strategic and International Studies.

“He needs to persuade Republican senators that he is being tougher than anyone and can get China to give up more than ever if he’s given a free hand to negotiate,” he said.

Karoun Demirjian in Washington and Emily Rauhala, Amber Wang and Yang Liu in Beijing contributed to this report.