Trump Expected to List China Tariffs, Potentially Reigniting Trade War

Posted June 14, 2018 11:38 p.m. EDT
Updated June 14, 2018 11:39 p.m. EDT

WASHINGTON — The White House is expected on Friday to release a final list of Chinese goods it plans to subject to tariffs and could soon begin putting some of those levies into effect, potentially reigniting a trade war that had been on the back burner while President Donald Trump engaged in delicate nuclear diplomacy with North Korea.

The Trump administration has vacillated between threatening tariffs on China and putting the trade war “on hold” as it tries to negotiate a deal with Beijing that would give U.S. companies greater access to the Chinese market. Those negotiations have produced little in the way of a firm commitment, however, with China offering to purchase nearly $70 billion in energy, agricultural and manufactured products from the United States, but only if the White House suspends tariffs on Chinese products.

So far, the White House has given no indication it plans to back away from its threat of tariffs, which Trump and his advisers see as giving the United States leverage in negotiations with Beijing. But while the administration is expected to detail on Friday the final list of goods it plans to subject to the tariffs, it may phase those in to allow for continuing discussions, according to people familiar with the administration’s plans.

In early April, the Trump administration outlined a preliminary list of roughly $50 billion in Chinese products that would be subject to 25 percent tariffs — including televisions, medical devices, aircraft parts and batteries. It has since refined the list based on feedback from business owners, trade groups and other industry representatives, who testified at public hearings in Washington in mid-May.

Still, any plan to impose tariffs — even on just a subset of Chinese products — could restart a trade war between the world’s two largest economies. China has threatened its own retaliatory tariffs on U.S. goods, including soybeans, pork and steel. Trump responded by saying his administration would consider levies on another $100 billion in Chinese products, though that list has not been finalized or released publicly.

Sarah Huckabee Sanders, the White House press secretary, said Thursday that the president’s trade team had met to discuss the China tariffs, but she would not confirm when the list would be released or when the tariffs would go into effect. The White House has previously said that its levies will go into effect shortly after a list of affected products is published by June 15, and that restrictions on Chinese investment in the United States will follow.

Trump administration officials have been engaged in vigorous internal debates in recent weeks over how to proceed with China. Steven Mnuchin, the Treasury secretary, and Larry Kudlow, the director of the National Economic Council, have been pushing for a more modest agreement that satisfies Trump’s desire to reduce the trade deficit. Peter Navarro, Trump’s trade adviser, and Robert E. Lighthizer, the U.S. trade representative, have urged deeper structural reforms to China’s industrial policy.

But negotiations with China have been complicated by Trump’s diplomatic dance with North Korea, given the involvement of the Chinese president, Xi Jinping, in helping facilitate the nuclear talks. Some observers said the fact that the talks with North Korea appeared to have gone well might give Trump more leeway to punish China now.

“Key administration officials reportedly have reached a consensus that some sort of penalties are now justified, given the lack of progress in negotiations, and that China is unlikely to derail the ongoing process on North Korea because it is so consistent with their security interests,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies.

Trump has tried to remain unpredictable in the negotiations, ordering up to $150 billion in proposed tariffs and calling on the Treasury Department to develop a plan for restrictions on Chinese investment in the United States.

However, Trump has also offered concessions. He directed his Commerce Department to offer a lifeline to ZTE, the Chinese telecommunications company that was on the brink of shutting down, the result of harsh penalties for violating U.S. sanctions. At the request of Xi, the Commerce Department agreed to a settlement with ZTE that included a $1 billion fine and the installation of a new compliance team.

Business groups have protested that tariffs on products from China would disrupt their supply chains, and that retaliation from Beijing could put valuable markets at risk.

“Tariffs are the wrong answer to China’s ongoing discriminatory and damaging trade practices,” said Dean Garfield, president of the Information Technology Industry Council, which represents some of the country’s largest tech firms. “By imposing tariffs on consumer goods and key components of such goods, the president would needlessly take money out of Americans’ pockets — harming the very people he hopes to help, not punishing China.”

No formal trade meetings between the United States and China are currently scheduled, but talks have continued to take place.

Mike Pompeo, the secretary of state, met on Thursday in Beijing with Wang Yi, China’s foreign minister, to discuss the situation with North Korea, and he said that they also spoke about trade.

“Our deficit with China is still too high,” Pompeo said. “I stressed how important it is for President Trump to rectify that situation so that trade becomes more balanced, more reciprocal and more fair, with the opportunity to have American workers be treated fairly.”

In an interview on Fox News that was broadcast Wednesday evening, Trump suggested that China had loosened its border with North Korea because it was frustrated with how strongly he is clamping down on trade. Trump said that within the next two weeks his hawkish approach to dealing with China on trade would be evident.

“They understand what we are doing,” Trump said.

But fanning the trade dispute with China comes with big risks, given that the United States is waging separate trade fights with Europe, Canada and Mexico over its imposition of tariffs on foreign steel and aluminum. Those countries have threatened to retaliate with tariffs of their own, and Mexico is already hitting $3 billion worth of U.S. products with tariffs.

On Thursday, the EU’s 28 member states endorsed a plan to impose import duties on 2.8 billion euros’ worth of American products, according to Kinga Malinowska, a spokeswoman for the office of the European commissioner for trade, Cecilia Malmstrom.

Canada is prepared to put retaliatory tariffs on an array of American products on July 1 if the United States does not back down from its metals tariffs.

On Thursday, Chrystia Freeland, Canada’s foreign minister, met with Lighthizer to discuss the future of the North American Free Trade Agreement, which is in doubt given disagreements between the United States and Canada and Mexico.

At a speech Wednesday evening, Freeland offered a stark rebuke of America’s protectionist trade policy and said Trump’s tariffs were “a naked example of the United States’ putting its thumb on the scale, in violation of the very rules it helped to write.”