WASHINGTON - President Donald Trump embarked Thursday on the sharpest trade confrontation with China in nearly a quarter-century, moving toward imposing tariffs on $60 billion in Chinese goods and limiting China's freedom to invest in the U.S. technology industry.
The Chinese government fired back hours later, threatening to hit $3 billion in U.S. goods with tariffs. Trump's announcement was "typical unilateralism and protectionism," China's Commerce Ministry said in a statement, and it had set a "very bad precedent."
"China does not want to fight a trade war, but it is absolutely not afraid of a trade war," it said in a statement issued Friday morning in Beijing. "We are confident and capable of meeting any challenge. It is hoped that the U.S. side will be able to make a swift decision and not to drag bilateral economic and trade relations into danger."
Trump's actions - which sent stocks to their biggest one-day drop in six weeks - followed a government finding that China had treated U.S. companies unfairly by coercing them into surrendering trade secrets for market access.
"We're doing things for this country that should have been done for many, many years," the president said at the White House.
Trump directed U.S. Trade Representative Robert Lighthizer to propose within 15 days tariff increases designed to compensate the United States for lost profits and jobs. After a comment period, the list, targeting Chinese products that benefited from U.S. technology, will be made public.
But even as he confronted China over technology, Trump weakened a new tariff meant to protect U.S. production of industrial metals, potentially exempting the European Union, Brazil and other countries accounting for two-thirds of steel imports and more than half of foreign-made aluminum.
By challenging China, Trump rejected the approach of his Republican and Democratic predecessors, gambling that China will bend before he does. "We don't know how this is going to turn out," said Scott Kennedy, director of the project on Chinese business at the Center for Strategic and International Studies. "It could be resolved in a few months, or it could spiral out of control into a broader strategic rivalry."
Early reviews were not good. On Wall Street, the benchmark Dow Jones industrial average plunged more than 700 points, or almost 3 percent, as investors blanched at the prospect of a trade war between the world's two largest economies.
"There's a lot of concern about this administration's shoot-first approach," said Josh Bolten, president of the Business Roundtable. "The victims of the actions that the administration is proposing to take are principally Americans."
Hours after Trump's announcement, China's commerce ministry gave the first indication of potential targets for retaliation, saying it had compiled a list of 120 products worth nearly $1 billion, including fresh fruit and wine, upon which it would impose a 15 percent tariff if the two countries fail to resolve their trade differences "within a stipulated time."
The department did not specify a deadline and said that a 25 percent tariffs on other goods, including pork and aluminum, could be imposed "after further evaluating the impact of U.S. measures on China."
Trump is betting that disrupting the traditional U.S. approach to China will yield a better commercial bargain for American businesses and workers than the status quo that he blames for hollowing out American industry.
Among U.S. politicians and business leaders, there is broad agreement that China has violated U.S. intellectual property rights through restrictive licensing arrangements in China and outright cybertheft in the United States.
But Thursday's actions threaten to unravel global supply chains, increase costs for consumers and open the door to Chinese retaliation against U.S. farmers and businesses.
"The biggest and most powerful American companies are stuck in the middle," said James McGregor, APCO Worldwide's chairman for greater China. "They're schizophrenic now. They don't want today's business to be eliminated. But they know China's plan for tomorrow is to eliminate them in the Chinese market and then take them on globally."
At $60 billion in affected products, Trump's China actions carry a bigger punch than the tariffs on $46 billion in steel and aluminum imports that he announced March 8.
The impact of those earlier levies may shrink further: Lighthizer told the Senate Finance Committee on Thursday that products from the European Union, Australia, Argentina, South Korea and Brazil will not be affected when the tariffs go into effect on Friday while negotiations over potential exemptions continue.
Trump already had exempted Canada and Mexico from the import levies for the duration of talks aimed at renegotiating the North American Free Trade Agreement.
The United States last adopted this sort of uncompromising approach in a 1995 dispute over intellectual property rights. China ultimately acceded to U.S. demands, but today its economy is almost 17 times as big, making it less vulnerable to American pressure.
A Sino-U.S. trade war would affect economies that account for roughly 40 percent of global output, which explains the mounting apprehension on Wall Street.
"Trump's economics team blew it," economist Chris Rupkey of MUFG Union Bank wrote in a research note. "Tariffs mean a trade war and the news has the world's investors running for the exits."
The president blamed China for the loss of 60,000 factories and 6 million jobs, a number that most economists say blends the impact on U.S. employment of both Chinese competition and automation.
Trump said that unfair Chinese trade practices are responsible for the yawning U.S. trade deficit with China, which has reached a record $375 billion on his watch.
"Any way you look at it, it's the largest of any country in the history of our world," the president said. "It's out of control."
The White House expects the new taxes, which could reach up to 1,300 specific imports, will have a "minimal impact" upon consumers. But even business groups that support the goal of requiring changes in Chinese industrial policy voiced opposition to the tariffs.
"There is no way to impose $50 billion in tariffs on Chinese imports without it having a negative impact on American consumers. Make no mistake, these tariffs may be aimed at China, but the bill will be charged to American consumer who will pay more at the checkout for the items they shop for every day," said Hun Quach, vice president for international trade at the Retail Industry Leaders Association.
Trump and his aides provided varying estimates of the value of the Chinese goods at issue. The president referred in his Roosevelt Room remarks to "about $60 billion," while a senior White House aide who briefed reporters two hours before the president put the figure at "about $50 billion."
The official cannot be identified under the ground rules for such White House briefings.
Trump also ordered Lighthizer to complain to the World Trade Organization about China's discriminatory licensing practices for foreign companies, an effort that U.S. officials hope will draw support from American allies in Europe and Japan.
The president described the actions against China as part of a broader reappraisal of U.S. global relationships, featuring a willingness to use tariff threats to force concessions from trading partners.
"We will end up negotiating these things rather than fighting over them," Commerce Secretary Wilbur Ross said, in an apparent reference to fears of a trade war.
The president also alluded to political calculations, saying that voter concerns over economic losses from bad trade deals was "maybe one of the main reasons" he won the White House.
"The era of economic surrender is over," Vice President Mike Pence added.
Trump's actions won plaudits from Democrats such as Sen. Sherrod Brown, Ohio.But they drew fire from the conservative National Taxpayers Union's Bryan Riley, who called the proposed China tariffs "self-destructive and reckless."
Under the measures targeting Beijing announced Thursday, Treasury Secretary Steven Mnuchin will draw up new investment restrictions to address concerns about Chinese investors, including state-sponsored investment funds acquiring U.S. companies to gain access to their technology.
"The end objective of this is to get China to modify its unfair trading practices," said Everett Eissenstat, deputy assistant to the president for international economic affairs.
Since the president took office 14 months ago, his remarks on China have swung between effusive praise for Chinese President Xi Jinping and tough talk about its trade practices. In recent months, Trump has adopted an increasingly bellicose tone, with the White House billing Thursday's actions as "targeting China's economic aggression" and the president's trade agenda released in February labeling the country a "hostile" economic power.
"China is engaged in practices which harm this country," said Peter Navarro, director of the White House Office of Trade and Manufacturing Policy.
Trump's trade moves potentially mark a sharp break with decades of growing U.S. economic engagement with China, which began in the late 1970s as the country emerged from Maoist autarky.
Years of commercial delegations and diplomatic dialogue saw trade between the two countries mushroom to $635 billion from $116 billion in 2000. Yet at the same time, U.S. companies complained about strict restraints on their operations in the Chinese market. Government regulations typically limited them to a minority stake alongside a local partner.
The administrations of George W. Bush and Barack Obama sought to persuade the Chinese to embrace more fully a market-oriented policy. Through 2013, when a high-level Communist Party conclave proclaimed a "decisive role" for the market and officials promised to pare back the state's role in the economy, U.S. officials believed China was headed in the right direction.
"That process has failed," Navarro said.
Trump administration officials say that China's economic policies are distorting global markets for key products such as steel and threaten to have the same effect on more advanced industries such as semiconductors and artificial intelligence.
"China benefits far more from the U.S.-China relationship than the U.S. does," Navarro said.
SPRINGFIELD, Mass. - Hussein Abdi, 19, had never given much thought to the gunmaker down the street from his high school. He often passed the Smith & Wesson factory and its flashing marquee touting the company's deep ties to the city, "Since 1852." Nyasia Jordan, 18, knew it only as the place where her mom used to work. It's one of the city's largest employers. Others saw Smith & Wesson's presence as another detail central to Springfield's identity, the place where basketball was invented, Dr. Seuss was born and guns are made.
But this once-easy relationship between city and gunmaker has been rattled by the discovery that the firearm used to kill 17 people at a Parkland, Florida, high school last month was made here. The gun was a Smith & Wesson M&P15, a version of the controversial AR-15 military-style rifle. And that weapon had been used in mass shootings before, including in Aurora, Colorado, and San Bernardino, California.
In the weeks since the Parkland shooting, as companies like Delta Air Lines severed promotional ties with the National Rifle Association and Dick's Sporting Goods stopped selling AR-15s, Smith & Wesson has found itself increasingly drawn into the public debate over gun violence. Now, for perhaps the first time in its long history, the gunmaker is also being attacked at home. Last week, protesters gathered outside the factory gates. Local students launched a letter-writing campaign directed at the company. They also plan to target the gunmaker this weekend during the city's "March for Our Lives" rally.
The gun debate is different in Springfield, where talk of gun control collides with concerns about jobs and the role of a local company in a national tragedy. Student activists, energized by the Parkland survivors' call for new gun laws, are struggling to balance their demands with the fact that guns support the local community and their parents' jobs. Some older residents are starting to question their high regard for the gunmaker.
"They've always been viewed as a major employer, but they are also viewed now as making weapons used in mass shootings," said the Rev. Douglas Fisher, bishop of the Episcopal Diocese of Western Massachusetts, based in Springfield, whose parishioners work at the gunmaker.
Not everyone supports the idea of taking on Smith & Wesson - or even wants to wade into the debate. Both the city's Democratic mayor and its only trauma hospital, where most gunshot victims are treated, declined to discuss the role of Smith & Wesson in the gun- violence debate.
"This is a town where guns are interwoven into the economic story," said Tara Parrish, director of the Pioneer Valley Project, a Springfield-based community advocacy group. "Gun manufacturing is just part of the fabric here."
But now some are seeing an old industry in new ways.
Abdi grew up in Springfield, worried about gun violence. A Kenyan refugee who has spent more than half his life here, Abdi lives in the city's south end where, he said, shootings are common. But those deaths happen one by one. The intense focus on one mass shooting and a single gunmaker has provided an opening for his own long-simmering concern.
"I feel a special responsibility on this one," Abdi said, standing just outside Smith & Wesson's gates after school. "I feel like we're the people who can do it. Because look, it's right there."
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Springfield can seem like an unlikely home for the nation's second-largest firearms manufacturer. Massachusetts has some of the nation's most stringent gun laws, including a ban on most AR-15s. Smith & Wesson can't even sell its M&P15 in the state.
But Springfield sits in the heart of "Gun Valley," named for the massive armory that for almost two centuries produced most of the U.S. military's small firearms, spurring other gunmakers to locate nearby. The armory's closure in 1968 devastated the local economy.
Today, Smith & Wesson is among the city's largest employers, behind MassMutual and the Big Y supermarket chain. And those jobs are needed. The unemployment rate in Springfield, the state's third-largest city, stands at 6.7 percent, almost three points higher than in the state overall. The gunmaker also contributes to local charities and sponsors local events, including the "Garden of Peace" at the city's annual holiday lights display - which some residents find a little ironic.
About 1,400 people worked at Smith & Wesson as recently as three years ago, when the firearms industry was booming amid worries about gun policy under President Barack Obama. Firearms sales have plummeted since then.
Smith & Wesson has been hit hard. Today it has 25 percent fewer manufacturing workers than a year ago, according to an earnings conference call for analysts earlier this month with the gunmaker's parent company, American Outdoor Brands. Its stock price is down 60 percent since President Donald Trump was elected. Still, Smith & Wesson - which did not respond to multiple requests for comment - reported selling $773 million in guns last year.
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It was just one gun that changed the conversation in Springfield. Dean Rohan heard about it from his daughter.
They were eating dinner at home in the Springfield suburbs when Jamison, 16, said she wanted to join the local gun-control protests, in part because a Smith & Wesson gun had been used in the Parkland massacre. They were a family comfortable with guns. Dean Rohan used to be an avid hunter. Jamison had a Daisy Red Ryder BB gun when she was younger.
"Smith & Wesson has been here my whole life," Dean Rohan recalled. "I've never looked at them in a bad way."
But listening to his daughter made him think. He was reluctant to blame the gunmaker. He blamed a lack of gun control. He saw no need for bump stocks or AR-15s. But he felt this kind of nuance is often lost in the all-or-nothing politics of the national gun debate.
Springfield - because it is a major gunmaker in a state with tight regulation - is home to seeming contradictions about guns. Carolyn Goldstein, a pediatrician in Springfield, said she hates gun violence but doesn't blame the local gunmaker for causing it.
"We don't think about Smith & Wesson. It doesn't come back to them," Goldstein said.
She's married to Mike Weisser, who for years ran a gun shop in a nearby suburb. Both favor a federal ban on AR-15s, at least.
"The only way you're going to end gun violence is to get rid of guns," Weisser said.
Now, a group of students are working toward that.
At a Dunkin' Donuts in the suburb of East Longmeadow, four students plotted how to target Smith & Wesson. They had mailed a letter to the company the day before to "call on you to rise about these politicians and cease the sale of assault weapons to the public such as the AR-15 that was used in the Parkland shooting."
"I think the gun companies should support us," said Sarah Reyes, 16.
"Why would they?" asked Amelia Ryan, 18. "Smith & Wesson is all guns. What else are they going to do?"
In the days after the Parkland shooting, Ryan found herself searching for "How to survive a mass shooting" videos online. She devoured the social media clips posted by Parkland students while the shooting was still going on. She read the victims' obituaries and was struck by the photo of one boy wearing a sweatshirt with the name of the college where he'd been accepted but would never attend.
Still, the teens were reluctant to go too hard after the company.
"They employ a lot of people," Ryan said.
The students also discussed their plans for a local version of the national "March for Our Lives," which they hoped to take past the front gates of Smith & Wesson. But they decided against it. They worried about attacking Smith & Wesson too directly. They had friends whose parents worked there. They didn't want to see it shut down. They wanted it to stop selling AR-15s.
"I kind of see Smith & Wesson like MassMutual," said Trevaughn Smith, 17. "If they close down, that would be detrimental . . ."
". . . to the economy at least," Ryan finished.
But not everyone in the city felt as energized to protest gun violence as the students meeting at Dunkin' Donuts. Anthony, a former Smith & Wesson employee who now works at a local gun shop, said he supported the students' right to protest, even if he disagreed with their message. Anthony, who declined to give his last name, said he didn't feel that the 17 deaths in Florida were the fault of Smith & Wesson.
"It's not their fault that a lone individual did something evil," he said, comparing it to a drunk driver killing someone. "Do we stop selling cars then?"
At New O'Brien's Corner bar, a few blocks from Smith & Wesson, a nurse offered a defense of the gunmaker.
"I love Smith & Wesson," said Lauren Townley, enjoying a post-shift drink with two co-workers. She owns a Smith & Wesson handgun, an M&P Shield.
Tammy Pouliot looked at her. Pouliot had been working at a hospital in Danbury, Conn., in 2012 when just a few miles away the Sandy Hook Elementary School shooting resulted in the death of 20 children and six adults. The shooter used a Bushmaster AR-15-style rifle.
"Why should you or anyone else have access to an AR?" Pouliot asked.
Townley softened briefly, then said again she didn't support new gun laws. "The problem is society," she said.
"I still feel like there needs to be more limits," said Pouloit.
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Later that day, there was a small protest outside Smith & Wesson - the first, many believed, in at least a generation. Five city police cars blocked off the main gate, supplementing Smith & Wesson's private security force.
"Oh my God," said Hussein Abdi. "What do they think is going to happen? We're going to rush in there?"
About 100 people stood on a small spit of land next to a four-lane road across from the gunmaker. The Pioneer Valley Project helped organize the protest. Some people had taken buses down from Boston and Holyoke. But most were locals. Episcopal leaders, dressed in purple scarves and cloaks, stood with other local clergy. Jamison Rohan had persuaded her father to drive her down.
Now she stood holding a sign reading, "#NEVER AGAIN," while he stood off to the side, watching and taking photos. Two Springfield students were joined by their grandfather wearing a "Vietnam Vet" baseball cap.
"Something's got to be done," Tom Wyrostek, 68, said.
Abdi peeked at his cellphone to study the short speech he was about to give. He was senior class president at Springfield Central High, but he'd never done something like this before.
"Smith & Wesson needs to see us and know they can't hide from us," Abdi said into a microphone.
The protest ended with a letter delivered to the front gate demanding that Smith & Wesson executives meet with city residents to talk about gun violence. A week later, the gunmaker had not responded.