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Trade war

Trump tariffs put China trade deal further out of reach

Beijing willing to reduce imbalance but high-tech remains a sticking point

U.S. President Donald Trump, right, has alternately sought conflict and compromise with Chinese counterpart Xi Jinping.   © Getty Images

WASHINGTON -- Just nine days after U.S. Treasury Secretary Steven Mnuchin declared that the trade war between the world's two largest economies was being put "on hold," the U.S. and China are back at loggerheads, as President Donald Trump's renewed push for tariffs on Chinese goods has thrown a wrench into efforts toward reaching a trade deal.

Commerce Secretary Wilbur Ross will travel to China from Saturday to Monday for a third round of negotiations, but a speedy resolution of trade tensions now looks unlikely.

"For many years, China has pursued industrial policies and unfair trade practices" that "make it impossible for many United States firms to compete on a level playing field," the White House said Tuesday in a statement announcing the tariffs. Washington will impose a 25% duty on $50 billion in Chinese goods in response to alleged intellectual property violations, bringing back a plan that previously had been shelved during trade talks.

The main goal of Ross' trip is to hammer out concrete steps to increase exports of such goods as natural gas and agricultural products. China is putting together a list of items that it could import more of, though how much it can do to meet Trump's demands to slash its $375 billion goods trade surplus by $200 billion remains an open question.

Finding common ground on technology -- a central element in the trade friction -- has proved harder as the two sides battle for dominance in high-tech fields. The White House statement explicitly noted that the planned tariffs will cover products related to the Made in China 2025 program, Beijing's plan to modernize the country's manufacturing sector.

Under this initiative, the government provides massive subsidies to tech companies to promote domestic production of advanced technology such as industrial robots. China has balked at U.S. demands to cut off this aid.

The previous round of talks focused on Chinese telecommunications equipment maker ZTE, which is foundering under a seven-year ban on American technology imports. Trump, who has said Chinese President Xi Jinping himself asked him to lift the ban, offered Friday to do so in exchange for a $1.3 billion fine and changes to management. The U.S. also would like to install American compliance officers at the company.

The sudden return to trade hostilities stems partly from conflict within the Trump administration over its approach to China. After Mnuchin declared the trade war "on hold," U.S. Trade Representative Robert Lighthizer expressed a different view. "Getting China to open its market to more U.S. exports is significant, but the far more important issues revolve around forced technology transfers, cybertheft and the protection of our innovation," he said.

China's influence over North Korea further complicates the dynamic. The list of Chinese goods subject to tariffs is due out by June 15, a few days after a scheduled June 12 meeting between Trump and North Korean leader Kim Jong Un. The president has a penchant for using trade issues to force diplomatic concessions, often with consequences for the global economy.

China's response to the tariff plan has been relatively muted. The Commerce Ministry issued a statement promptly, which suggests it was prepared for the possibility. Calling the move both surprising and not surprising, the ministry argued that it clearly runs contrary to the agreement the two sides reached this month.

Foreign Ministry spokesperson Hua Chunying said Wednesday that "if the U.S. is bent on having its own way, we will surely take firm and forceful measures to safeguard our legitimate rights and interests."

This contrasts with the response to Trump's call in early April for duties on another $100 billion in Chinese goods after Beijing's tit-for-tat response to Washington's initial tariff threat. The Commerce Ministry was slower on the draw and took a more pugnacious stance, while state-run media roundly criticized the U.S.

Beijing's newfound confidence owes to a trump card: the prospect of retaliatory tariffs on American soybeans. China accounts for 60% of U.S. soybean exports, and a punitive duty would deal a serious blow to farming-heavy states that support Trump. U.S. negotiators specifically asked China to refrain from such tariffs on American agricultural products in the first round of trade talks this month.

Nikkei staff writer Issaku Harada in Beijing contributed to this article.

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