On April 3, 2018, the U.S. Trade Representative (USTR) announced a 25% import tariff on $50 billion of Chinese goods from the aerospace, information and communication technology, robotics, and machinery industries. This follows last month's announcement of tariffs against the Chinese aluminum and steel industry, on which we previously reported. The tariffs do not have a certain beginning date, although USTR will host a public hearing on the tariffs on May 15, 2018. China immediately retaliated by publishing a list of $50 billion of U.S. goods that would be subject to a 25% import tariff. This list includes many of the largest U.S. exports to China. While the successive rounds of tariffs have set off fears of a trade war and roiled financial markets, the delayed implementation of the actions opens a window for the U.S. and China to seek a negotiated resolution.
These tariffs come as a conclusion of the Section 301 investigation of China, which was commenced in August of 2017. The USTR has stated that the tariffs are in response to Chinese policies that “coerce American companies into transferring their technology and intellectual property to domestic Chinese enterprises.” The tariffs list of 1,300 items was reportedly designed to maximize pressure on China, while minimizing disruption to the American economy. For example, the list targets items that are important to the “Made in China 2025” program, while considering alternative sources of imports required by U.S. industry. As part of this Section 301 proceeding, the U.S. will also launch a World Trade Organization (WTO) challenge against China relating to its intellectual property practices and unfavorable contract terms in foreign contracts, and the U.S. Treasury Department was ordered to investigate potential executive branch actions to limit Chinese investment in the United States.
The Chinese response has been swift and critical. The Chinese Embassy in the United States released a statement on the morning of April 4, 2018, stating that China “strongly condemns and firmly opposes” the tariffs, and that “it is only polite to reciprocate.” The statement continued, promising “corresponding measures of equal scale and strength against U.S. products” and a WTO challenge. Later in the day, the Chinese Ministry of Commerce released a list of $50 billion of 106 U.S. products on which China will impose a 25% tariff. These products included some of the biggest U.S. exports to China, such as soybeans, certain aircraft, beef, whiskey, passenger vehicles, and industrial chemicals. This is the second round of tariffs announced by China this week – it released a list of $3 billion worth of products targeted by tariffs in retaliation for U.S. tariffs against the Chinese aluminum and steel industries on April 2, 2018. Those tariffs included targets such as wine, pork, and fruit. The items on China’s tariff lists were also carefully calculated to exert pressure on politically sensitive U.S. industries and regions.
Importantly, neither the U.S. nor Chinese tariffs have a certain implementation date. This allows both countries to come to the negotiation table if there is a will to do so. Zhu Guangyao, Chinese Vice Minister of Finance, said at a news conference regarding the tariffs that China does not want a trade war and that “a trade war would hurt the interests of both countries.” The Trump administration has yet to respond to the latest announcement of Chinese tariffs.