Trump moves towards China tariffs in warning shot on technology transfer

[webfact]

Trump moves towards China tariffs in warning shot on technology transfer

By Lesley Wroughton and Roberta Rampton

 

U.S. President Donald Trump holds his signed memorandum on intellectual property tariffs on high-tech goods from China, at the White House in Washington, U.S. March 22, 2018. REUTERS/Jonathan Ernst

 

WASHINGTON (Reuters) - U.S. President Donald Trump lit a slow-burning fuse on Thursday to launch long-promised anti-China tariffs, but his actions appeared to be more of a warning shot than the start of a full-blown trade war with Beijing.

 

A presidential memorandum signed by Trump will target up to $60 billion in Chinese goods with tariffs over what his administration says is misappropriation of U.S. intellectual property, but only after a 60-day consultation period that starts once a list is published.

 

Trump also gave the Treasury Department 60 days to develop investment restrictions aimed at preventing Chinese-controlled companies and funds from acquiring U.S. firms with sensitive technologies.

 

The waiting periods will give industry lobbyists and U.S. lawmakers a chance to water down a proposed target list that runs to 1,300 products, many in technology sectors.

 

It also will create space for potential negotiations for Beijing to address Trump's allegations on intellectual property and delay the start of immediate retaliation against U.S. products from aircraft to soybeans.

 

"I view them as a friend" Trump said of the Chinese as he started his announcement. "We have spoken to China and we are in the middle of negotiations."

 

'FIGHT TO THE END'

 

But his actions provoked a belligerent response from China's embassy in Washington, which vowed Beijing would "fight to the end" in any trade war with the United States.

 

"We will retaliate. If people want to play tough, we will play tough with them and see who will last longer," Chinese ambassador Cui Tiankai said in a video posted to the embassy's Facebook page.

 

Stocks fell sharply on Trump's announcement, with the Dow Jones Industrial Average <.DJI> falling nearly 3 percent. Major industrials that could become targets of Chinese trade retaliation slumped further, with aircraft maker Boeing <BA.N> down 5.2 percent and earthmoving equipment maker Caterpillar <CAT.N> falling 5.7 percent.

 

In addition to punitive tariffs, Trump's memo also directed U.S. Trade Representative Robert Lighthizer to challenge China's technology licensing programs at the World Trade Organization. The WTO has repeatedly drawn the ire of the administration but it could provide a resolution that avoids a trade war.

 

The steps are based on the results of USTR's eight-month investigation of suspected misappropriation of American technology by China.

 

U.S. officials say that probe, undertaken through Section 301 of the 1974 Trade Act, has found that China engages in unfair trade practices by forcing American investors to turn over key technologies to Chinese firms.

 

Trump, who earlier this month announced steep tariffs on steel and aluminium imports to the United States, also wants the Chinese to take action that would lower the $375 billion goods trade deficit that the United States is running with China.

 

White House officials told a briefing ahead of the trade announcement that the administration was eyeing tariffs on $50 billion in Chinese goods. They said the figure was based on a calculation of the impact on the profits of U.S. companies that had been forced to hand over intellectual property as the price of doing business in China.

 

There was no explanation of the difference between that figure and Trump's $60 billion.

 

"Many of these areas are those where China has sought to acquire advantage through the unfair acquisition and forced technology transfer from U.S. companies," said Everett Eissenstat, deputy director of the National Economic Council.

 

In addition, Trump will also direct the U.S. Treasury to propose measures that could restrict Chinese investments in the United States, Eissenstat said.

 

China has threatened to target U.S. exports of agricultural commodities, in particular the $14 billion in exports of soybeans.

 

Reaction from U.S. industry groups sought to strike a balance, applauding the president for tackling the persistent drain of U.S. technology to Chinese competitors, but urging negotiations instead of tariffs.

 

"American business wants to see solutions to these problems, not just sanctions such as unilateral tariffs that may do more harm than good," said John Frisbie, president of the US-China Business Council.

 

Despite threats of retaliation, China has been keen to portray itself as a defender of globalization, a message that was reinforced in a call between President Xi Jinping and French President Emmanuel Macron.

 

That said, there is a risk of a mounting cycle of retaliation. U.S. Trade Representative Lighthizer warned on Wednesday that Washington would take "counter measures" if Beijing targeted U.S. agriculture.

 

The biggest risk to world trade over the longer term may not be a tit-for-tat trade war, but the breakdown of global supply chains that feed companies such as U.S. auto giant General Motors Co <GM.N> and Apple Inc <AAPL.O>.

 

"Tensions are likely to escalate further, even without a full-scale trade war. This could disrupt global supply chains and damage investor sentiment," said Dario Perkins, head of global macroeconomics research at TS Lombard, a London-based economic consultancy.

 

Trump's steel and aluminium tariffs, which are tied to Section 232 of the 1962 Trade Expansion Act, go into effect on Friday. Canada and Mexico have been given initial exemptions from the 25 percent steel and 10 percent aluminium tariffs.

 

Lighthizer told U.S. lawmakers on Thursday that the European Union, along with Argentina, Australia, Brazil and South Korea, would also be exempted.

 

 

(Additional reporting by Steve Holland, David Chance, David Lawder, David Brunnstrom and Susan Heavey; Writing by David Lawder; Editing by Doina Chiacu, Paul Simao and Grant McCool)

 

-- © Copyright Reuters 2018-03-23

[dcutman]

If you add up all those numbers in the chart above, there is nearly a $5 trillion trade deficit just with China and another $2 trillion trade deficit with the EU since 1997.

Overall the US runs a $500 to $600 billion a year World wide trade deficit. Can you imagine what the the US would look like if there was fair trade Worldwide over the last 30 years. The US would not be $21trillion in debt thats for sure.

[downtowneddie]

A lot of people are jumping on Trump about this but the fact is he is making a fair point. I've been to Beijing and what struck me about the supermarkets and such is that you don't see any foreign brands, not even in consumer goods like shampoo, soap, toothpaste. That kind of thing whereas in other developing nations they're all over the place. My sister lives in Beijing and she says Chinese women routinely fly to South Korea to get the cosmetics that they can't obtain in China. The Chinese really do play very unfairly. The problem is that it's kind of late in the day to be doing this and will impose substantial hardships on certain sectors of the America economy. It's close to a sure thing that the Chinese will hit back hardest where Trump and Republicans most needs the support of voters, It doesn't look good for  Republicans in the states that export soybeans and pork. And that's mostly Republican country. Will voters there be willing to make the sacrifice necessary? I hope so, but I doubt it.

[tonbridgebrit]

https://uk.finance.yahoo.com/news/china-strikes-back-trade-spat-013045477.html

Beijing has already drawn up some action to retaliate if Donald Trump does put up these tariffs.
From the article "Beijing's disclosure of its planned retaliation to proposed tariffs on Chinese metal exports to the United States, served as a warning to Washington as both sides brandished their weapons while holding off from starting a full-blown trade war."

Let's all hope that Washington does not start a trade war. I really do hope that Trump's advisors will make him see sense. A trade war might actually hurt America more than it hurts China.

[Lungstib]

I know little about trade or business but find the graph interesting. It starts at 1985 around the time US firms decided to close down local made manufacturing and have them produced in China. Clothes and shoes for all the big fashion names went and bigger profits became normal. The U.S. stopped making fridges, T.V's, computers, phones, washing machines and dishwashers, shut down the good manufacturing jobs and laid off the staff. They even bought cars and spare parts from overseas, cheaper and just as good. And now they complain they have to buy all these things from China. This was a choice, made by big business for better profits.  Google, Microsoft, Amazon, Starbucks and Facebook are what they were left with because it wasn't manufacturing and industry. 

[Thaidream]

The Chinese present a clear and present danger to America- they are not friends- they are predators seeking markets; land and resources anywhere and everywhere so as to supply their population and keep their citizens docile so the Communist Party survives.

 

America is way too dependent on China- buying way too much from them and allowing China to purchase American debt. China's foreign reserves are in the Trillions of Dollars.

 

America needs to balance its budget and stop allowing china to purchase American debt and convince the American public to buy American- not Chinese.

[Lungstib]

1 minute ago, Thaidream said:

America needs to balance its budget and stop allowing china to purchase American debt and convince the American public to buy American- not Chinese.

There is no American to buy! And if there were it would be twice the price. They willingly sent manufacturing away. 

[HLover]

1 minute ago, Lungstib said:

There is no American to buy! And if there were it would be twice the price. They willingly sent manufacturing away. 

The radio said China would raise tarrifs on American products, costing a whole 6 billion USD in lost exports.

 

Hmmm, 60 billion vs 6 billion...seems like a good idea.

[impulse]

1 hour ago, tonbridgebrit said:

Let's all hope that Washington does not start a trade war. I really do hope that Trump's advisors will make him see sense. A trade war might actually hurt America more than it hurts China.

 

That's a lot like going back to December 8, 1941 and hoping FDR doesn't start a war with Japan. 

 

There's been a trade war going on for 20+ years.

 

Edited March 23, 2018 by impulse

[the guest]

EU should also do the same, bring the jobs back and stop buying from China. The problem with that scenario, not only have we lost the industry, but the skills that with it.

[Thaidream]

Yes, they gave away a lot.  Let's start by making  Apple bring the complete manufacturing base for the I phone out of China back to the United States.  If they don't- they can still import it back at a 50%  excise tax on the product.  Apple could easily make this phone in America   and keep the price the same but it's profit margin would go down.  Too Bad.  How about American industry start doing things for America and Americans instead of selling the company store abroadto make more billions.

Any of these companies ever hear of patriotism!

[dunroaming]

2 hours ago, tonbridgebrit said:

Let's all hope that Washington does not start a trade war. I really do hope that Trump's advisors will make him see sense. A trade war might actually hurt America more than it hurts China.

I agree with the sentiment but getting Trump to see sense is a bit of a stretch.  Any "advisor" that speaks up will just get fired and most of them know that so remain the nodding dogs that Trump demands.

 

A trade war with China would definitely hurt the USA more than China.  That is a no brainer.

[downtowneddie]

6 hours ago, HLover said:

The radio said China would raise tarrifs on American products, costing a whole 6 billion USD in lost exports.

 

Hmmm, 60 billion vs 6 billion...seems like a good idea.

I'm pretty sure that it was 3 billion in tariffs that China was going to impose against Trump's restrictions on Chinese steel and aluminium imports. They didn't address the tariffs targeting China only. China could devastate US agriculture in pro-trump areas if it decides to.

[thedivezone]

5 hours ago, dunroaming said:

I agree with the sentiment but getting Trump to see sense is a bit of a stretch.  Any "advisor" that speaks up will just get fired and most of them know that so remain the nodding dogs that Trump demands.

 

A trade war with China would definitely hurt the USA more than China.  That is a no brainer.

Agreed, additionally a trade war would cost the orange one his next presidency, whereas the chinese guy is pretty much settled for life.

Trump should have started the war after his declared himself president for life.

[pegman]

Canadian hog, soybean & canola farmers thank Trump. MCGA!

[impulse]

3 hours ago, downtowneddie said:

I'm pretty sure that it was 3 billion in tariffs that China was going to impose against Trump's restrictions on Chinese steel and aluminium imports. They didn't address the tariffs targeting China only. China could devastate US agriculture in pro-trump areas if it decides to.

 

Where are they going to get the food they'd no longer be importing from the USA?  Because they'd be buying someone else's current source of food, who would then be forced to buy their food somewhere else.  Probably from those pro- Trump areas.

 

Edited March 23, 2018 by impulse

[impulse]

7 hours ago, dunroaming said:

A trade war with China would definitely hurt the USA more than China.  That is a no brainer.

 

Seriously?  With over a billion dollar a day trade deficit?  How, exactly, would the USA be hurt more than China?  Where is China going to sell all the excess capacity they'd find themselves with?  

[Credo]

It's a gutsy move on Trump's part.   I am not a supporter of him, but on this one, I'll take  a wait-and-see position.   It's the law of unintended consequences that might be the downfall.   

 

No doubt he is a risk-taker.   

[janclaes47]

14 hours ago, dcutman said:

Can you imagine what the the US would look like if there was fair trade Worldwide over the last 30 years. The US would not be $21trillion in debt thats for sure.

 

I always thought that if you have such a large trade deficit it means that your products carry no interest to the outside world, which can be for many reasons, but if you have the right product at the right price people will buy.

[downtowneddie]

6 hours ago, impulse said:

 

Where are they going to get the food they'd no longer be importing from the USA?  Because they'd be buying someone else's current source of food, who would then be forced to buy their food somewhere else.  Probably from those pro- Trump areas.

 

If supply were in perfect balance or if there were a shortage of some commodity. But typically in the case of soy and corn there are surpluses. 

[downtowneddie]

6 hours ago, janclaes47 said:

 

I always thought that if you have such a large trade deficit it means that your products carry no interest to the outside world, which can be for many reasons, but if you have the right product at the right price people will buy.

You're ignoring the fact the governments like China's intervene to make selling certain classes of foreign products impossible.

[downtowneddie]

6 hours ago, impulse said:

 

Seriously?  With over a billion dollar a day trade deficit?  How, exactly, would the USA be hurt more than China?  Where is China going to sell all the excess capacity they'd find themselves with?  

Since China is a dictatorship it's a lot easier for it to impose retaliatory tariffs than it is for a democracy like the USA.

[impulse]

On 3/24/2018 at 7:12 AM, downtowneddie said:

If supply were in perfect balance or if there were a shortage of some commodity. But typically in the case of soy and corn there are surpluses. 

 

I can't speak to corn and soybeans, or even more specifically- to the locations within the USA that's growing them for export.  But a lot of agriculture is depleting the groundwater resources to grow products for export, with industrial farms taking advantage of obsolete water rights laws that deprive communities of their future water security in favor of some small but powerful special interests. 

 

Some would suffer financial reversals if China imposed tariffs on soy and corn, but I suspect it's the Monsanto's of the world and not the family farmers.  And the communities wouldn't see their future (in the form of their water) being exported to China.  That would be a favorable unintended consequence.

 

It's not as simple as some would believe it is.  Unfortunately, the likes of Monsanto have huge legal and lobbying teams to convince us that it is...

 

Edited March 26, 2018 by impulse

[FritsSikkink]

On ‎23‎/‎03‎/‎2018 at 9:53 AM, dcutman said:

If you add up all those numbers in the chart above, there is nearly a $5 trillion trade deficit just with China and another $2 trillion trade deficit with the EU since 1997.

Overall the US runs a $500 to $600 billion a year World wide trade deficit. Can you imagine what the the US would look like if there was fair trade Worldwide over the last 30 years. The US would not be $21trillion in debt thats for sure.

Better start making things they want to buy then.

[Lungstib]

On 24/03/2018 at 12:17 AM, impulse said:

Seriously?  With over a billion dollar a day trade deficit?  How, exactly, would the USA be hurt more than China?  Where is China going to sell all the excess capacity they'd find themselves with?  

Conversely, where is America going to find all the home appliance's it needs? Computers, phones, T.V.s etc.

[mikebike]

On 3/23/2018 at 4:10 PM, Thaidream said:

Yes, they gave away a lot.  Let's start by making  Apple bring the complete manufacturing base for the I phone out of China back to the United States.  If they don't- they can still import it back at a 50%  excise tax on the product.  Apple could easily make this phone in America   and keep the price the same but it's profit margin would go down.  Too Bad.  How about American industry start doing things for America and Americans instead of selling the company store abroadto make more billions.

Any of these companies ever hear of patriotism!

Its called fiduciary responsibility to their shareholders and is a founding and binding principle of corporations as we created them. Let me repeat - a corporation is legally bound to its shareholders and the bottom line NOT to people of any nation.

 

If your are looking for corporations to right the ship god help you. 

[impulse]

9 minutes ago, Lungstib said:

Conversely, where is America going to find all the home appliance's it needs? Computers, phones, T.V.s etc.

 

I remember when they were all made in the USA.  By people with good jobs.  They cost a little more than they do today- adjusted for inflation, but people with good jobs can afford a little more.  Henry Ford and George Westinghouse had it right.  They knew that the market for their products depended on a population with wages high enough to buy them.

 

Take I-Phones for example.  Doubling the cost of assembly labor would drive the cost to manufacture an $800 phone by around $10.  Driving Apple's gross profit from $650 to $640 a pop.

 

[impulse]

18 minutes ago, mikebike said:

Its called fiduciary responsibility to their shareholders and is a founding and binding principle of corporations as we created them. Let me repeat - a corporation is legally bound to its shareholders and the bottom line NOT to people of any nation.

 

If your are looking for corporations to right the ship god help you. 

 

You mean like Ford and Westinghouse, who realized that the only way their companies could make money is if enough of the population had jobs that paid enough to buy their products?  And when they paid their people more, GE and GM had to pay more to compete for the best employees.  And then even more people could afford to buy their products.

 

Or do you mean like the guys in today's race to the bottom?

Edited March 26, 2018 by impulse

[mikebike]

15 minutes ago, impulse said:

 

You mean like Ford and Westinghouse, who realized that the only way their companies could make money is if enough of the population had jobs that paid enough to buy their products?  And when they paid their people more, GE and GM had to pay more to compete for the best employees.  And then even more people could afford to buy their products.

 

Or do you mean like the guys in today's race to the bottom?

You really love living' in the past don't you? Just as 2018 was not 1776, 2018 is not the industrial revolution at the turn of the 20th century.

 

Ford Motor Company and Westinghouse were not publicly traded corporations at the time you are referencing they were private.

 

Not that I disagree with your point, but publicly traded corporations were designed by us, and are legally bound, to maximize shareholder profit nothing else. Times have changed and looking to the past for answers is a losing game. 

[impulse]

3 hours ago, mikebike said:

You really love living' in the past don't you? Just as 2018 was not 1776, 2018 is not the industrial revolution at the turn of the 20th century.

 

Ford Motor Company and Westinghouse were not publicly traded corporations at the time you are referencing they were private.

 

Not that I disagree with your point, but publicly traded corporations were designed by us, and are legally bound, to maximize shareholder profit nothing else. Times have changed and looking to the past for answers is a losing game. 

 

And that's working so well for the likes of GE...

 

The reason I look to the past is because that's when the USA was at it's strongest and every generation expected to do better than their parents' generation.  Whatever they're doing today- isn't working.  At least not for the majority of Americans, or for the USA.

 

Edit:  BTW, if you want to know my whole belief system on the issue, look up Richard Wolff's "Capitalism Hits the Fan".  He explains it as clearly and simply as anyone I've ever seen, heard, or read.

 

Edited March 26, 2018 by impulse