China targets $3 billion in US goods over Trump's steel tariffs

This first salvo in reaction to US steel and aluminium tariffs could be overshadowed by the decision to approve a possible tariff hike on Chinese goods worth up to $60 billion over Beijing's technology policy.

President Donald Trump speaks before he signs a presidential memorandum imposing tariffs and investment restrictions on China in the Diplomatic Reception Room of the White House, Thursday, March 22, 2018.
AP

President Donald Trump speaks before he signs a presidential memorandum imposing tariffs and investment restrictions on China in the Diplomatic Reception Room of the White House, Thursday, March 22, 2018.

China announced a $3 billion list of US goods for possible retaliation in a tariff dispute with President Donald Trump and girded for a bigger battle over technology policy as financial markets sank on fears of disruption to global commerce.

China's Commerce Ministry said higher duties on pork, apples, steel pipe and other goods would offset Chinese losses due to Trump's tariff hike on steel and aluminium imports. 

It urged Washington to negotiate a settlement but set no deadline.

In a separate dispute with potentially bigger consequences, the ministry criticised Trump's decision on Thursday to approve a possible tariff hike on Chinese goods worth up to $60 billion over Beijing's technology policy. 

It gave no indication of a possible response but the foreign ministry said Beijing would take "all necessary measures" to protect its interests.

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The president said the tariffs could cover "about $60 billion" in trade with China, but senior White House officials said the US Trade Representative had identified 1,300 product lines worth about $50 billion as potential targets.

That list would include aerospace, information and communication technology, and machinery, according to a USTR fact sheet. But further details were scant.

The order signed by Trump directed the trade representative to publish a list of proposed tariffs for public comment within 15 days. Trump also asked Treasury Secretary Steven Mnuchin to come up with a list of restrictions on Chinese investment and said the administration was preparing a case before the World Trade Organization.

Market jitters

Financial markets sank on concern the escalating tensions might disrupt the biggest global trading relationship or lead other nations to raise import barriers.

The dollar dipped to 104.85 yen as investors shifted into the Japanese currency, which is viewed as a "safe haven" from risk.

China's response on Friday appeared to be aimed at increasing domestic US pressure on Trump by making clear which exporters, including farm areas that voted for him in 2016, might be hurt.

AP

Imported nuts from the United States are displayed at a supermarket in Beijing, Friday, March 23, 2018. China announced a $3 billion list of US goods including pork, apples and steel pipe on Friday that it said may be hit with higher tariffs in a spiralling trade dispute with President Donald Trump that companies and investors worry could depress global commerce.

Linked to Trump's tariffs

China's Commerce Ministry said Friday's list was linked to Trump's steel and aluminium tariffs, but companies already were looking ahead to potential disruption from the bigger squabble over American complaints Beijing steals or forces companies to hand over technology.

The list made no mention of jetliners, soybeans or other products that are the biggest US exports to China by value and that the American Chamber of Commerce in China said might be the targets. That leaves Beijing options to take more drastic steps.

Friday's announcement should be seen as a "preliminary response," with more sweeping measures if necessary, said Lu Feng, a trade specialist at Peking University's School of National Development.

"China doesn't want a 'trade war,' but if the United States insists, then China must respond," said Lu.

China's proposed measures would impose a 25 percent tariff on pork and aluminium scrap, mirroring Trump's 25 percent charge on steel, according to the Commerce Ministry. 

The second list of goods including wine, apples, ethanol and stainless steel pipe would be charged 15 percent, the same margin as Trump's tariff hike on aluminium.

Chinese purchases of those goods last year amounted to $3 billion, the ministry said. 

That would be less than two percent of China's $153.9 billion of imports of US goods last year; a fraction of the goods targeted by Trump's order on Thursday in the technology dispute.

Hurting the US economy

American business groups have warned the aluminium and steel tariffs could hurt the US economy and disrupt exports.

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China's top economic official, Premier Li Keqiang, appealed to Washington on Tuesday to "act rationally" and said, "we don't want to see a trade war."

The higher American duties on aluminum and steel have little impact on China, which exports only a small amount of those products to the United States. But private sector analysts have said Beijing would feel obligated to take action to avoid looking weak in a high-profile dispute.

China's Commerce Ministry said the higher US tariffs "seriously undermine" the global trading system. It rejected Trump's contention they are needed to protect US national security.

Handing over technology

The technology dispute stems from complaints Beijing unfairly compels foreign companies to hand over technology in exchange for market access and supports cyberspying to steal industrial secrets.

Companies in many industries including auto manufacturing that want to operate in China are required to work through local partners, which requires them to give technology to potential Chinese competitors.

The US Trade Representative's office said Trump's action was in response to "unfair and harmful acquisition of US technology." 

The USTR said Trump had ordered it to pursue a World Trade Organization case against Beijing's "discriminatory technology licensing."

A USTR statement said possible measures include a 25 percent tariff on Chinese-made aerospace, computer and information technology and machinery but gave no details of what products that might include.

Promise to import more

On Tuesday, the Chinese premier promised at a news conference Beijing will "open even wider" to imports and investment as part of efforts to make its economy more productive.

Li said that included eliminating tariffs on drug imports. But he gave no other details and it was unclear whether the planned changes might mollify Washington, the European Union and other trading partners that complain China improperly blocks access to its markets and subsidises exports.

Li said Beijing would "fully open" manufacturing to foreign competitors, with "no mandatory requirement for technology transfers." However, Chinese officials already insist companies aren't required to hand over technology, so it was unclear how policy might change.

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