Trade Blog

US PROPOSES NEW TARIFFS ON CHINA AHEAD OF FURTHER TRADE TALKS

By Jason Zhou, Jeffrey A. Rinde, and Jing Li

Consensus on reduction of trade deficit 

On May 17 and 18, 2018, a Chinese delegation led by State Council Vice Premier Liu He met with its U.S. counterpart in Washington D.C. and reached a broad consensus to reduce the U.S. trade deficit with China. Currently, the trade deficit stands at almost 4 to 1.[1]

China agreed to, among other things, significantly increase the purchases of U.S. goods and services, including agriculture and energy products. Both sides also affirmed the need to expand trade in manufactured goods and services and to create a fair and level playing field for competition, and the importance of intellectual property protections.[2]

Both sides also agreed to continue engaging in high level talks on these issues. 

U.S. increases pressure on China

However, on May 29, the White House announced and reinstated the previously threatened 25% tariff to be imposed on $50 billion of imports from China containing “industrially significant technology”, including those related to the “Made in China 2025” program. The Made in China 2025 program is a multi-billion dollar plan to help transform China’s high-tech industries into world leaders by 2025.[3] The final list of covered imports will be announced by June 15, 2018, and tariffs will be imposed on those imports shortly after.[4]

Citing the need to protect its domestic technology and intellectual property from certain discriminatory and burdensome trade practices by China, the White House also announced that the U.S. will implement investment restrictions and exports controls for China relating to the acquisition of industrially significant technology. The proposed investment restrictions and export controls will be announced by June 30, 2018, and will be implemented shortly thereafter.  In addition, the White House announced its intention to pursue litigation at the WTO for violations of the Agreement on Trade-Related Aspects of Intellectual Property Rights based on China’s purportedly discriminatory practices for licensing intellectual property. The U.S. filed the case regarding these violations on March 23, 2018.

Along with these announcements, President Trump remarked on the history of China’s unfair trade practices, including the following:

  • China’s industrial policies such as its “Made in China 2025” program;
  • China’s imposition of higher tariffs on U.S. exports compared to U.S. tariffs on Chinese goods;
  • China’s ban of U.S. agricultural products such as poultry;
  • China’s dumping and subsidy of goods that undermine the U.S. domestic market;
  • China’s overproduction of steel and aluminum which threatens to impair U.S. national security;
  • The U.S. trade deficit with China, including $375 billion in 2017;
  • China’s intellectual property violations and production of counterfeit goods coming into the United States;
  • China’s technology policies that threaten U.S. technology jobs, including forced technology transfers, requiring licensing at less than economic value, Chinese state-directed acquisition of sensitive U.S. technology for strategic purposes, and cyber theft; and
  • China’s use of foreign ownership restrictions, administrative review and licensing processes to force technology transfers from U.S. companies, including requiring foreign companies that access their New Energy Vehicles market to transfer core technologies and disclose development and manufacturing technology, and imposing contractual restrictions on the licensing of IP and technology by foreign firms into China.

Almost immediately after the White House announcement, China’s Ministry of Commerce responded, “The U.S.’ tactical statement is both unexpected and within expectations,” and that “whatever measures the U.S. takes, China has the confidence, capability and experience to defend the interests of the Chinese people and the core interests of the country.” China also urged the U.S. to act in accordance with the spirit of the recent bilateral joint statement.[5]

Additionally, at a regular press conference on May 30, Hua Chunying, China’s foreign ministry spokesperson, said:

I believe that we all share the same feeling that when it comes to international relations, each and every flip-flop will only lead to further depletion and squandering of a country’s credibility and reputation. The U.S.’ statement explicitly runs against the consensus it reached with the Chinese side in Washington D.C. not long ago. We urge the U.S. to honor its words and meet China halfway in the spirit of our joint statement.[6]

However, despite such criticism, China’s State Council announced further cuts to import tariffs for daily consumer goods starting July 1.[7]

U.S.-China Trade Talks Continue

According to a statement made by the spokesperson of China’s Ministry of Commerce at a regular press conference, despite the new developments above, a U.S. delegation of more than 50 members arrived in China on May 30, and both sides will discuss and strive for a consensus over the next few days.[8]

CKR’s China Practice team will be closely monitoring the development of these trade talks between both countries, and will publish an update for our readers.



[1] https://www.census.gov/foreign-trade/balance/c5700.html.

[2] https://www.whitehouse.gov/briefings-statements/joint-statement-united-states-china-regarding-trade-consultations/.

[3] https://www.csis.org/analysis/made-china-2025.

[4] https://www.whitehouse.gov/briefings-statements/statement-steps-protect-domestic-technology-intellectual-property-chinas-discriminatory-burdensome-trade-practices/.

[5] http://www.mofcom.gov.cn/article/ae/ag/201805/20180502749654.shtml.

[6] http://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/t1563933.shtml.

[7] http://www.xinhuanet.com/english/2018-05/31/c_137218446.htm.

[8] http://www.mofcom.gov.cn/xwfbh/20180531.shtml.