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China vows to retaliate on US tariffs

By Chen Weihua in Washington | China Daily USA | Updated: 2018-04-04 15:02

China denounced a US government announcement on Tuesday that slapped tariffs on 1,300 Chinese products under Section 301 of the US Trade Act of 1974.

The list published by the US trade representative came after US President Donald Trump signed a memorandum on March 22 to impose additional tariffs on $50 billion worth of imports from China that followed a Section 301 investigation launched last August into China's intellectual property policies and practices.

"China strongly condemns and firmly opposes the US tariff proposals and is ready to take reciprocal measures on US products," the Ministry of Commerce said in Beijing shortly after the US announcement.

The Ministry of Foreign Affairs also denounced the US action as "unilaterlistic and protectionist".

It said China will announce its countermeasures in the coming days.

"We have the confidence and capability to respond to any US protectionist measures," spokesman Lu Kang said in a statement. "The US action has recklessly disregarded the 40 years of China-US economic cooperation, which is mutually beneficial and win-win in nature. It has recklessly disregarded the outcry from the business community and interests of consumers.

"It serves neither China's interest, nor US interest, even less the interest of the global economy," Lu added.

The Chinese embassy in Washington said in a statement that "we hope that the US side, with sense and long-term picture in mind, refrains from going further down the wrong path".

The USTR said its proposed list of products is based on extensive interagency economic analysis and would target products that benefit from China's industrial plans while minimizing the impact on the US economy.

Sectors subject to the proposed tariffs include industries such as aerospace, information and communications technology, robotics and machinery. The list covers mostly industrial products and non-consumer goods, such as aircraft seats, military rifles, machine parts, instruments, medical products, video monitors, and furnaces and ovens.

US Trade Representative Robert Lighthizer and White House trade adviser Peter Navarro both said recently that the Section 301 tariffs will primarily target Chinese industries under the Made in China 2025 strategy.

Lighthizer has described that strategy as a threat to the global trading system, while Navarro said China was "going to dominate every single emerging industry of the future, and therefore your economies aren't going to have a future".

The Made in China 2025 plan, unveiled in 2015, highlighted 10 sectors in advancing China's modern manufacturing power - information technology, high-end machinery and robotics, aerospace, marine equipment and ships, advanced rail transport, new-energy vehicles, electric power, agricultural machinery, new materials and biomedical.

Premier Li Keqiang said in Beijing last week that the Made in China 2025 strategy is an open and fair environment with equal treatment of domestic and overseas businesses.

"China will not force any technology transfer from any foreign company and will enhance efforts to protect intellectual property rights and severely crack down on infringement, and China welcomes more globally competitive businesses to share the China growth opportunities," Li said.

The USTR's proposed list will undergo further review in a public notice and comment period, including a hearing. After completion of the process, the USTR will issue a final determination on the products subject to the additional duties.

"The tariffs will mostly increase the price of intermediate goods and hurt US manufacturers who are supposed to be the beneficiaries of Trump's trade policies. It does not seem well thought through," said Edward Alden, a senior fellow at the Council on Foreign Relations.

Trump said on Tuesday before the announcement that the US will be working with China. "Our relationship is very good with China. We intend to keep it that way. But we have to do something to seriously relieve that trade deficit," he said, repeatedly mentioning a bilateral trade deficit of $500 billion.

The US trade deficit with China, however, was $375 billion, according to US data, and $275 billion according to Chinese data.

Many economists believe the bilateral trade deficit does not matter, and the US trade deficit is a result of its own fiscal policies and the role of the US dollar as a global currency.

The Trump administration tax-reduction plan, which went into effect in February, is expected to drive up the US trade deficit.

A Deutsche Bank Research report last week pointed out that the US-China trade imbalance is misleading because it includes only trade but not the sales generated through US subsidiaries in China, which reached $223 billion in 2015 and are rising.

According to the bank's aggregate sales balance, the bilateral imbalance was only $30 billion in favor of China but moving in favor of the US.

"We helped rebuild China," Trump told the media in a meeting with Baltic leaders.

"The Chinese people rebuilt China, not outsiders," said Yukon Huang, a senior fellow of the Asia program at the Carnegie Endowment for International Peace.

Huang said Chinese did this by drawing on their exceptionally high savings rates to fund much needed investments that led to a dramatic increase in productivity. He said that unlike many other developing countries, China relied relatively little on foreign aid but more on foreign direct investment (FDI) through the Chinese diaspora.

"The US actually provided relatively little financial support, since only about 1 to 2 percent of America's FDI over the past two decades went to China," Huang said.


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