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Trade war

US and China escalate trade tension with pledges of tariffs

Beijing vows retaliation after Trump announces levies on $50bn worth of goods

A shipping container is unloaded from a vessel in Mount Pleasant, South Carolina. The U.S.and China reignited trade tensions on Friday.    © Reuters

WASHINGTON/BEIJING -- China immediately declared plans for retaliatory tariffs of the "same scale and intensity" against the U.S. after President Donald Trump said Friday that his administration will proceed with a 25% levy on $50 billion worth of imports from the Asian country.

A total of 1,102 Chinese products will be affected, according to the final list announced by the United States Trade Representative on Friday. Washington plans to put the new rate into effect July 6 on 818 of the products, worth $34 billion, mainly on high-tech items like industrial robots and electronic components.

The remaining 284, mainly those heavily subsidized by Beijing such as chemicals and optical fiber, first will undergo a public notice and comment process.

The new list was smaller than the initial 1,300 products announced in April, reflecting resistance from certain industry groups. Mobile phones and flat-panel TVs -- items commonly purchased by American consumers -- also were excluded from the tariff list.

Yet the moves further escalate trade tensions between the world's two largest economies.

"My great friendship with President Xi [Jinping] of China and our country's relationship with China are both very important to me," Trump said in a statement on Friday. "Trade between our nations, however, has been very unfair, for a very long time. This situation is no longer sustainable."

Trump specifically took issue with the acquisition of American intellectual property and technology. The products subject to the new tariffs include goods related to Beijing's "Made in China 2025" initiative, he said. The president called the initiative a "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 and many other countries."

"The United States can no longer tolerate losing our technology and intellectual property through unfair economic practices," Trump said. He also threatened additional tariffs should China retaliate.

China responded swiftly. "We will immediately take tariff measures of the same scale and intensity," Foreign Ministry spokesperson Lu Kang said late Friday. "All economic and trade outcomes of the previous talks will now lose effect."

The spokesman blamed the Trump administration for its "flip-flops" and said the U.S. had "ignited a trade war."

A senior U.S. administration official, briefing reporters after the announcement, called the tariffs "defensive" in purpose and said they aim to give American companies "a chance to compete on a level playing field in these industries of the future."

The official noted particular concern toward Chinese state-backed companies acquiring U.S. businesses from under potential American buyers and subsequently gaining their technologies.

"This is not market capitalism. This is not people trying to get a rate of return -- these are state policies where they're targeting certain industries," the official said.

William Reinsch, a senior adviser at the Center for Strategic and International Studies in Washington said both sides lose. "The Chinese lose because their stuff becomes more expensive, American consumers lose because the stuff they buy becomes more expensive," he said.

Reinsch questioned if the tariffs would lead to American companies sourcing parts and components from domestic suppliers. "It could very well mean that they go to the Korean or Vietnamese or Japanese competitor," he said.

The two sides have held three rounds of trade talks since May. Washington demanded a $200 billion reduction in China's trade surplus with the U.S., as well as a major revision to the "Made in China 2025" initiative.

In the second round, China agreed to boost imports of American agricultural and energy products. "We're putting the trade war on hold," U.S. Treasury Secretary Steven Mnuchin had said afterward.

But Trump did not think that was enough. He announced on May 29 that the tariffs would be enacted as planned. China offered to buy another $70 billion of American products in early June, but only if the U.S. scrapped its tariff plans.

Roughly three weeks remain before the U.S. enacts the 25% tariff. If Beijing offers further concessions, the countries may prevent tensions from escalating too far.

But the U.S. also is squabbling with other countries over trade. Washington imposed additional tariffs on steel and aluminum imports from the European Union, Canada and Mexico on June 1. The EU and Canada are working to put a retaliatory tariff in effect starting July 1.

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