Trump pushes ahead with China sanctions reigniting trade tensions

US President Donald Trump is moving ahead with his threat to apply tariffs on China ahead of a key trade meeting.

US President Donald Trump. Picture: AP

The Trump administration sent a sudden, harsh message to its Chinese counterparts on Tuesday morning, saying the US was moving forward with its threat to apply tariffs on Chinese imports and other moves to restrict Beijing from accessing sensitive US technology.

The move surprised many observers after the White House had for days trumpeted the outlines of a deal, in which any trade war with China would be put on hold while negotiators — led on the US side by Treasury Secretary Steven Mnuchin — worked on a deal that would have China reduce its $US375 billion annual trade advantage by buying more US goods.

The White House said Tuesday it would announce by June 15 a final list of $US50bn in imports from China that would be subject to tariffs of 25 per cent, with the duties implemented “shortly thereafter.” Planned investment restrictions aimed at preventing Chinese acquisition of American technology would also be announced by June 30, the White House said in a statement.

The $US50bn in tariffs on Chinese imports is the first tranche in a package that the White House said could lead to tariffs on a total of $US150bn in Chinese imports.

In a response hours later, China’s Commerce Ministry pledged to defend its “core national interests,” issuing a statement calling the US action both “unexpected” and “within expectations.”

Officials in Beijing, who were hard at work on measures to ease trade tensions, were caught off-guard by the announcement in Washington, according to people with knowledge of the matter. Just a few days ago, US trade negotiators led by Mr Mnuchin and their Chinese counterparts, led by Liu He, President Xi Jinping’s economic envoy, had called a truce in a simmering trade conflict, saying both sides would put threatened tariffs on hold.

In their talks in Washington preceding the truce agreement, the US side also indicated to the Chinese that the Trump administration was “under huge pressure” to act tough on China, the people said. “That’s why today’s statement from the White House is also within China’s expectations,” one of the people said.

Meanwhile, Beijing also sees the White House announcement as the administration’s way of exerting pressure on China ahead of Commerce Secretary Wilbur Ross’s trip to Beijing to meet Chinese officials later this week. In its statement, China’s Commerce Ministry described the announcement by the Trump administration as “strategic.”

Some US-China watchers agree. President Donald Trump “is just trying to re-create leverage ahead of Ross’s trip to China so that, one, there’s more likely to be substantive progress, and two, he can claim to this domestic audience that whatever is achieved was because of these new threats,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies.

Mr Trump has also said he is relying on China to put pressure on North Korea as Washington and Pyongyang work to salvage a planned summit June 12 on nuclear disarmament and other issues.

“The Trump administration is clearly signalling, ahead of Wilbur Ross’s trip to Beijing, that the gloves are off given China’s unwillingness to agree to a trade deficit reduction target or to make broader trade concessions,” said Eswar Prasad, a Cornell University professor of international trade. In addition, the “hard line stance may partly reflect the perception that China played a part in nearly derailing the Trump-Kim summit.”

Some US politicians have expressed concerned about the Trump administration’s being too conciliatory over ZTE Corp., a major Chinese tech company banned from buying US-made parts after it was found to have violated sanctions on Iran and North Korea. ZTE has suspended business operations after the Commerce Department blocked it from accessing US-made parts that are critical to its business.

“The administration plunged ahead with its plan to save Chinese jobs at Iran and North Korean sanctions violator ZTE,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate’s trade committee. “Now there’s a baby step in the other direction. I can’t see any rhyme or reason to these erratic policy shifts.”

US Trade Representative Robert Lighthizer has emphasised that the US may still resort to tariffs under an investigation that his office conducted into alleged theft of US technology and intellectual property. Tuesday’s statement from the White House mentioned that investigation, launched under trade law known as Section 301, as well as a case Mr Lighthizer is pursuing against Chinese licensing requirements at the World Trade Organisation.

Some businesses have supported the Trump administration’s efforts to crack down on what they see as China’s efforts to put them at a competitive disadvantage. But overall, major business groups are worried that Mr Trump’s tough approach risks touching off a trade war, with cycles of tariffs and retaliation on both sides.

“We would like to see both sides put the threat of sanctions on hold and quickly get into negotiations to resolve these important issues,” said John Frisbie, president of the US-China Business Council, which represents American firms doing business in China. “Tariffs and restrictions on commerce will have a real and negative impact on the economy and jobs.”

A White House spokeswoman and spokesmen for Messrs. Ross and Lighthizer declined to comment on the context of Tuesday’s statement on tariffs and investment restrictions.

Meanwhile, Chinese authorities had signalled recently they would approve Qualcomm Inc.’s planned $US44bn acquisition of Netherlands-based NXP Semiconductors NV in the next few days, according to people familiar with the matter, in what would be another significant step toward easing frayed US-China trade relations.

—Bob Davis in Washington contributed to this article.

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