China Responds to Impending Tariffs

On Thursday, President Donald Trump signed a memorandum that authorizes the U.S. Trade Representative to determine what type of tariffs should be placed on China to handle the country’s unfair trade practices.

The memorandum says that the U.S. Treasury Department should consider restrictions on the communist country “to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.”

The Trump administration could impose tariffs of 25 percent on $50 billion of Chinese exports and will be announcing which products would be subjected to tariffs in the next 15 days. 

Immediately following this announcement, several media outlets claimed that the “trade war” with China has officially begun. 

In response, the market fell, which is common with media pushing the “trade war” stories. On Thursday, the Dow fell 724 points, which is about 3%.

But China will be given time to respond. 

So far, there have been mixed responses from Chinese officials regarding the memorandum.

“China would fight to the end to defend its own legitimate interests with all necessary measures,” said China’s embassy in Washington in a statement on Thursday. “China is not afraid of and will not recoil from a trade war.”

The embassy said the tariffs would have more of a negative impact on the American financial market, companies and consumers.   

“We urge the US to cease and desist, make cautious decisions, and avoid placing China-U.S. trade relations in danger with the purpose of hurting others that eventually end up hurting itself,” said the statement from the Chinese Embassy.

The Trump Administration has said that it’s making trade policy a priority this year, especially pertaining to China.

“You do see a theme in some of the upcoming decisions the president has to make,” said the official to WSJ. “You have Chinese industrial policy at its core.” 

U.S. officials have continuously claimed that China is guilty of stealing U.S. intellectual property too. 

“After a seven-month investigation, the office of the US Trade Representative concluded that China hurts US technology companies in a variety of ways,” writes CNN Money. “For example, when American tech companies want access to China’s market, China forces them to enter joint ventures with its own companies, the USTR said. The American companies are forced to share software, patents and tech secrets, which Chinese firms then steal and use to push the Americans out of the market.”

The administration had discussed introducing harsher penalties on Chinese imports, like aluminum, steel, and solar equipment for the last year in an effort to counteract the trade deficit. 

Then earlier in the month, Trump signed an order imposing a 25% tariff on steel products and 10% on aluminum goods. However, the EU, South Korea, Brazil, Australia, Argentina, Mexico and Canada are exempt from these tariffs.

Treasury Secretary Steven Mnuchin defended this move by Trump to reduce the trade deficit with China. 

“We’re not afraid of a trade war, but that’s not our objective,” said Mnuchin.

He suggested that this is all part of the U.S. negotiating tactics.

“We’re going to proceed with our tariffs … but we’re simultaneously having negotiations with the Chinese to see if we can reach an agreement,” said Mnuchin on Fox News Sunday. “I’m cautiously hopeful we reach an agreement, but if not, we are proceeding with these … tariffs.” 

In response to the steel tariffs, China’s Commerce Ministry gave reporters in Beijing a list of some of the U.S. goods that could be subjected to reciprocal tariffs.

Could this really be the start of a trade war? 

Some experts argue that China doesn’t want a trade war with its best customer.

“We’ve seen so far no indication of any really serious Chinese intent to retaliate in any significant way,” said Alan Tonelson, the founder of the public policy blog RealityChek to CNBC on Thursday. “I have to assume Beijing understands very well how heavily dependent it is for adequate growth and for adequate job creation on retaining some access to the U.S. market, which means it really doesn’t want to start a trade war with its very best customer.” 

Author’s note: It seems like it’s too soon to tell if this is really a “trade war.” It appears like this is all part of negotiating positions. Hopefully, China recognizes how much they need the U.S. as a trade partner and a fairer agreement is put in place that gives more of an advantage to the U.S.

Editor’s note: The world had become used to the U.S. rolling over when negotiations came around. Trump’s tariffs are a surprise to China, and the world will be further surprised when their retaliation and blustering don’t work.