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Trump to impose tariffs on $50B of Chinese imports

President Donald Trump will impose tariffs on $50 billion of U.S. imports from China in order to curtail "unfair" trading practices and forced transfer of intellectual property from American companies doing business there, two senior White House officials told reporters March 22, as fears of a protectionist waves sent share markets tumbling.

Trump was set to sign a memorandum recommending the tariffs on Chinese imports after the call with reporters March 22, marking a significant escalation of global trade tensions. The order will direct the Office of the U.S. Trade Representative to publish a proposed product tariff list within 15 days of the memorandum signing.

The final tariff product list, which an official described as a "long list," will be identified following a public comment period and a Federal Register notice. Although the official did not specify which products may be targeted, he did say it reflects "high technology" that has been targeted by China for intellectual property theft. The public comments will be considered before the tariffs are put in place, he noted.

The $50 billion figure is designed to "offset the gains that the Chinese have received through unfair practices," one of the White House officials said, particularly through forced technology transfers of American companies and joint ventures by China.

"The remedies were carefully weighed," an official said. "The end objective is to get China to modify its unfair trading practices."

Fears of a wave of tit-for-tat protectionist measures around the world at the same time as central banks tighten policy sent shares lower while investors bought safe-haven bonds. The S&P 500 slid 1.2% to 2678.17 by 12:48 pm ET. The yield on 10-year Treasury bonds fell five basis points to 2.83%. The yen rose against the dollar and gold gained. Brent crude fell almost 1%.

Markets have grown increasingly nervous over trade since Trump said early in March that he would impose tariffs on steel and aluminum imports. U.S. Trade Representative, or USTR, Robert Lighthizer said March 22 that the U.S. would temporarily exempt the European Union, as well as Australia, Argentina, Brazil and South Korea, from the levies. Canada and Mexico had already been granted temporary exemptions.

White House National Trade Council Director Peter Navarro told reporters in opening remarks on the call that he expects China is "likely to respond" in a retaliatory manner. He noted that China's GDP has grown by about 800% since it joined the World Trade Organization in 2001, while the American economy's annual growth rate has dropped to about 2%. China's GDP has grown from $1.34 trillion in 2001, when it first joined the World Trade Organization, to $12.25 trillion, an increase of about 814%, according to Chinese government data.

"China will have a choice on how to respond," Navarro said. "They have benefited far more from this relationship than we have, and they'll certainly take that into account."

The memorandum will also direct the U.S. Treasury Department within 60 days to recommend any investment restrictions on China as a result of what the official said is China's history of using state-owned and financed vehicles to buy up American intellectual property and technologies.

Despite concerns raised by many industries, detailing how the tariffs will spike production costs and consumer prices and potentially disrupt supply chains that run through China, the White House official said the harm done by intellectual property theft and forced transfer of technology is "incalculable."

"We believe that there will be minimal effects on the consumer," one of the senior officials said.

The tariffs come as a result of the Section 301 investigation the USTR's office launched in August 2017, which explored whether the Chinese government uses joint venture requirements and foreign equity limitations to secure American intellectual property as a cost of U.S. companies doing business there.

Trump has said he hopes to reduce the United States' $375.2 billion trade deficit with China by $100 billion.

Lighthizer told the House Ways and Means Committee on March 21 that his office will use an "algorithm" to calculate the proper remedy in any tariffs against China.

A USTR official said March 21 that the Trump administration recognizes the "gravity" of the situation, adding that it is strongly considering how China may react to the tariffs. The country is prepared to impose tariffs on $10 billion of U.S. soybean exports, the Chinese state-run outlet Global Times has reported.