President Donald Trump said the U.S. would impose 25% tariffs on $50 billion of Chinese goods and threatened more in case of retaliation, in the latest in an escalating round of measures that have fueled fears of a global trade war.
"In light of China’s theft of intellectual property and technology and its other unfair trade practices, the United States will implement a 25 percent tariff on $50 billion of goods from China that contain industrially significant technologies," Trump said in a statement.
"The United States will pursue additional tariffs if China engages in retaliatory measures, such as imposing new tariffs on United States goods, services, or agricultural products; raising non-tariff barriers; or taking punitive actions against American exporters or American companies operating in China," he said.
The Chinese government responded by issuing 25% tariffs on 545 U.S. products, set to go into effect July 6, according to reporting from The Wall Street Journal. Those products include chemicals, medical items and energy products, the Journal said.
On the U.S. side, a list provided by the Office of the United States Trade Representative, or USTR, detailed 1,102 separate products from industrial sectors, including those related to the "Made in China 2025" program, Beijing's attempt to make the country a major competitor in advanced manufacturing. The tariffs cover industries including aerospace, information and communications technology, robotics and automobiles. Covered imports do not include goods commonly purchased by U.S. consumers, such as televisions and cellphones.
A first $34 billion stage of the tariffs will take effect July 6, with another $16 billion to be announced later, the USTR said.
The S&P 500 stock index fell 0.5% at 11:49 a.m. ET after Trump's widely anticipated announcement, while the yield on 10-year U.S. Treasurys eased 2 basis points to 2.915%. The dollar fell more than 0.4% against the euro but was little changed against the yen.
"The likelihood of more protectionist threats means that global asset prices will remain stuck in a 'trade war trap' and lack any clear direction," ING said in a research note.
The U.S.-China fallout comes a week after Trump's stormy visit to the G-7 summit in Canada, which deflated hopes of reversing a slide toward increased protectionism. Canada and European Union countries said they would prepare tariffs on U.S. steel and aluminum in response to U.S. measures. Talks to renegotiate the North American Free Trade Agreement have also slowed, with Mexican, Canadian and U.S. negotiators unable to agree to a new framework in time for the U.S. Congress to vote on a new package in 2018.
Groups representing some of the largest retailers in the U.S. swiftly condemned the Trump administration’s move.
"These tariffs won’t reduce or eliminate China’s abusive trade practices, but they will strain the budgets of working families by raising consumer prices," said Matthew Shay, president and CEO of the National Retail Federation, which has executives from Walmart Inc., Google Inc. and Tractor Supply Co. on its board of directors.
The news of tariffs against the Chinese hit agricultural commodities, with U.S. soybeans facing their worst weekly performance in nearly two years. Wheat and corn also showed drops following the announcement.
Trump's move came despite a reported Chinese promise to purchase nearly $70 billion of agriculture products, provided the U.S. would abandon its plans to impose levies.
A senior administration official accused the Chinese of using unfair means to acquire U.S. technology.
"China has practices that pressure companies to transfer technology to China and to joint ventures in China," the official told reporters after the announcement. "If a U.S. company is trying to license their technology they don't get to do it on the same terms [as Chinese companies.] China is using state money ... to buy U.S. companies to get hold of [intellectual property] in those companies. China is engaged in intrusion and cybertheft in U.S. commercial networks in order to get a commercial advantage."
Lawmakers on Capitol Hill have been wary of Trump's moves regarding trade, though Senate Republican leaders blocked an amendment to a defense-spending bill from retiring Tennessee Republican Sen. Bob Corker that would have given Congress veto power over certain presidential tariffs. Corker accused his colleagues of bowing to Trump's demands during a floor speech.
While Republicans are unlikely to curb Trump's trade influence, that did not stop them from warning that the president's moves could hurt American workers.
"Tariffs will harm American and Chinese businesses and consumers, and will put economic growth in both countries at risk," said Senate Finance Committee Chair Orrin Hatch, R-Utah. "America's trade strategy must focus on combating China's discriminatory and market-distorting practices. Ill-conceived trade actions that weaken the American economy, alienate allies, and invite retaliation against American businesses, farmers and ranchers, undermine our nation's ability to successfully confront China’s unfair trade policies."
Meanwhile, Trump earned praise from an unlikely source: Senate Minority Leader Chuck Schumer, D-N.Y.
"The president's actions on China are on the money. China is our real trade enemy, and their theft of intellectual property and their refusal to let our companies compete fairly threatens millions of future American jobs," Schumer said in a statement. "While we await further details on this trade action, President Trump is right on target."