Donald Trump moved to slap a 10 per cent tariff on about $200bn worth of Chinese imports beginning next week and threatened to increase the rate to 25 per cent in 2019 if no deal was reached to ease trade tensions between the US and China.
The latest step by the US president — to which China has vowed to reply with its own round of retaliatory levies — represents a sharp escalation in the commercial confrontation with Beijing, plunging the global economy into treacherous waters.
The US has already imposed levies on about $50bn of Chinese imports this year, mainly steel and aluminium products, but the addition of tariffs on a further $200bn worth of products would sharply increase the economic impact to the point where duties will cover about half of all Chinese imports.
The tariffs are designed by the Trump administration to force Beijing into a deal that would involve shrinking the US trade deficit with China and abandoning policies such as the forced technology transfer that have long been criticised by corporate America.
“I urge China’s leaders to take swift action to end their country’s unfair trade practices. Hopefully, this trade situation will be resolved, in the end, by myself and President Xi [Jinping] of China, for whom I have great respect and affection,” Mr Trump said in a statement.
However, it risks raising costs for American consumers and US businesses that rely on Chinese imports to be competitive.
To blunt some of the negative effects in the US — and following an intense lobbying campaign by some of the targeted sectors — the Trump administration decided to exempt certain products included in the original list.
In a win for Apple, consumer electronics such as smartwatches and bluetooth devices were removed. In addition, chemicals used in manufacturing, textiles and agriculture, as well as safety items such as bicycle helmets, playpens and high chairs for children, were struck from the list, a senior administration official said.
In recent weeks, the US administration has been consumed by a heated internal debate over the approach to China. Trade hardliners, such as Peter Navarro, the main White House trade adviser, and Robert Lighthizer, the US trade representative, have been pushing for a tougher approach to exert maximum pressure on Beijing.
But Mr Mnuchin and Larry Kudlow, the head of the National Economic Council, have advocated a softer approach to encourage negotiation. The decision to start out with a lower rate, and then move to a higher rate if needed, reflects Mr Trump’s desire to balance those two competing philosophies.
