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Abu Dhabi, UAEThursday 20 September 2018

Trade war looms as US lays out plans for $50 billion tariffs on China

Donald Trump accuses China of intellectual property theft in his latest broadside in his America First strategy

Donald Trump has threatened retaliation over "Chinese economic aggression" sparking further fears of a trade war.  EPA/JIM LO SCALZO
Donald Trump has threatened retaliation over "Chinese economic aggression" sparking further fears of a trade war. EPA/JIM LO SCALZO

Donald Trump prepared the ground for a full-scale trade war as he announced plans to impose tariffs worth up to $50 billion on China in response to the theft of US technology and anti-competitive practices.

The US president proposed tariffs of 25 per cent on Chinese imports of aerospace equipment and machinery as a punishment for what he said was unfair industrial policies.

Hours later, China responded by announcing plans for reciprocal tariffs on $3 billion of imports from the US.

According to Bloomberg News, China’s Commerce Ministry said it plans a 25 percent tariff on US pork imports and recycled aluminium, and 15 percent tariffs on American steel pipes, fruit and wine.

The moves set the scene for a collision between the world’s two most powerful economic powers that will have ramifications around the world.

Mr Trump's measures specifically target hi-tech products and key industries that China hopes will drive its future economic fortunes. Mr Trump said the US would also propose restrictions on Chinese investment in sensitive US technology.

The measures were widely anticipated after the president launched an inquiry in August last year into Chinese trade practices and protectionism.

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Trump may impose $50bn in China tariffs over intellectual-property violations

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The inquiry concluded that China was behind the hacking of US companies to steal trade secrets and other sensitive commercial information.

A White House statement cited the 2014 case when the US charged five Chinese military hackers with cyber espionage against US businesses for commercial advantage. The inquiry also concluded that US companies were being forced into handing over technological secrets in return for access to the Chinese market.

The White House said a list of the proposed tariffs would be published within 15 days. Trade officials have already identified 1,300 products worth about $48 billion.

The measures are a response to a major trade imbalance between the two counties and what Mr Trump said was the “largest deficit of any country in the history of the world”. He added:

“It’s out of control.”

He said that he saw China as a friend but was acting to prevent what he called “tremendous intellectual property theft”.

“Under my administration, the theft of American prosperity will end,” he said in a statement. “We’re going to defend our industry and create a level playing field for the American worker, finally.”

The announcement marked Mr Trump’s first trade measures aimed directly at China which he blames for affecting the US manufacturing sector and the loss of jobs.

The announcements followed plans to impose import tariffs of 25 per cent on steel and 10 per cent on aluminium but has offered a series of exemptions to trading partners.

The series of measures and threats has sparked concerns of a new era of global protectionism with countries responding with tit-for-tat measures to protect their own domestic industries.

Policy makers, including Christine Lagarde, the managing director of the International Monetary Fund, has warned that a global trade conflict could undermine the broadest world recovery in years.

Mr Trump also turned his fire on the European Union, complaining that the 28-nation trading bloc had high and unequal tariff barriers. But the EU is expected to win an exemption on the metal tariffs.

“It could be a watershed moment,” said Stephen Ezell, vice president of global innovation policy at the Information Technology & Innovation Foundation, a think tank. “The Trump administration's decision to go down this path is illustrative that previous strategies have not borne the hoped-for fruit.”

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