Following through on its threat to impose tariffs on $34 billion worth of Chinese products, the Trump administration today officially kicked off a trade war between the world’s two largest economies.
The move follows an investigation launched last year under Section 301 of the Trade Act of 1974 by the U.S. Trade Representative into Chinese intellectual property and technology transfer policies. The resulting USTR report found Beijing uses foreign ownership restrictions, including joint ventures, licensing processes and other means, to pressure or force U.S. companies to transfer technology and other intellectual property to Chinese entities; imposes non-market-based restrictions on U.S. companies seeking to license technologies in China; directs and unfairly facilitates predatory investments and acquisitions in the United States to generate large-scale technology transfers to Chinese companies; and conducts and authorizes cyber intrusions into U.S. companies to access their sensitive commercial information, such as trade secrets.
Looking to pressure the Chinese government into altering these “unacceptable” trade practices while also opening its market to American exports and seeking to address the “massive trade imbalance” between the two nations, President Trump last month announced a range of measures to combat what he described as “China’s economic aggression,” including punitive tariffs on up to $50 billion worth of imports.
Stating that the U.S. “can no longer tolerate losing our technology and intellectual property through unfair economic practices,” Trump said the Section 301 tariffs would primarily target “goods related to China’s Made in China 2025 strategic plan to dominate the emerging high-technology industries that will drive future economic growth for China, but hurt economic growth for the United States.”
The list of products issued by the USTR covers 1,102 separate U.S. tariff items valued at approximately $50 billion divided into two sets. The first set contains 818 items of the original 1,333 that were included on the proposed list published on April 6. These are the tariff items on an estimated $34 billion worth of Chinese imports that went into effect today.
The second set of tariffs consisting of 284 different goods identified by the inter-agency Section 301 Committee as benefiting from Beijing’s industrial policies – covering roughly $16 billion worth of imports from China – are presently undergoing further review in a public notice and comment process, including a public hearing. After completion of this process, USTR will issue a final determination on the products from this list that would be subject to the additional duties.
Canadian exporters should be aware that Section 301 tariffs will also apply to any covered Chinese-originating goods that have been customs cleared or warehoused in bond in Canada that are subsequently exported to the U.S.
For its part, Beijing responded as expected with matching retaliatory tariffs of its own, announcing today that effective immediately it was imposing an additional 25% tariff on 545 products from the United States including soybeans, electric cars, orange juice, whiskey, lobsters, salmon and cigars, according to China’s Ministry of Commerce.
Need More Information?
If you have any questions or concerns about the escalating China-U.S. trade dispute and how it might impact your business, please don’t hesitate to contact one of our consultants by e-mail or by phone at 1-800-667-0771.