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China hits the United States with tariffs on $3 billion of exports

China is showing the United States that it will make good on its trade threats.The Chinese government said tha...

Posted: Apr 2, 2018 3:22 PM
Updated: Apr 2, 2018 3:22 PM

China is showing the United States that it will make good on its trade threats.

The Chinese government said that tariffs on about $3 billion worth of US imports are going into effect Monday, hitting 128 products ranging from pork, meat and fruit to steel pipes.

It's the latest move in escalating tensions between the world's two largest economies, which some experts fear could turn into a trade war.

Beijing says the new sanctions on 128 US products, which it first proposed 10 days ago, are in response to President Donald Trump's tariffs on imports of steel and aluminum from China and some other countries.

But Trump also has more measures in the works aimed specifically at China. He has announced plans to slap tariffs on about $50 billion worth of Chinese goods following an investigation by his administration into the theft of intellectual property from US companies.

Related: The world is on the brink of a trade war

The administration has said those tariffs will punish the Chinese aerospace, technology and machinery industries, but it hasn't announced which specific products will be hit.

The tariffs also won't take effect right away. A US fact sheet says the administration will take public comments for 30 days on the proposed action. US Trade Representative Robert Lighthizer told CNBC last week that the public comment period would be 60 days.

In the meantime, Treasury Secretary Steven Mnuchin has said the United States and China are talking behind the scenes in hopes of preventing an escalation.

It's unclear how China would respond to those aggressive measures. For now, Beijing is focusing on its response to the steel and aluminum tariffs.

China's commerce and finance ministries said in statements late Sunday that authorities are imposing tariffs of 15% on 120 American products - such as fruits, nuts, wine and steel pipes - and 25% on eight other products, including pork and recycled aluminum.

Those products make up just a tiny portion of the hundreds of billions of dollars of goods shipped between the two countries each year. But the tariffs are alarming news for the affected industries.

The US National Pork Producers Council warned last month that the measures would "have a significant negative impact on rural America." It said the US pork industry sold $1.1 billion worth of products to China last year, making it the third largest export market.

China is upset that Trump imposed the steel and aluminum tariffs on the grounds of national security, which Beijing says is an abuse of global trade rules.

Since first announcing the metal tariffs, the White House has said it will spare a number of allies from the measures, including Canada, Mexico, the European Union and South Korea.

China's Ministry of Commerce said in its statement late Sunday that those exemptions "seriously violate" World Trade Organization rules that prohibit members from discriminating against other WTO members.

It said it hoped the US government would withdraw the tariffs "as soon as possible so that the trading of products between China and the United States will return to a normal track."

Related: What happens when the world's two biggest economies turn on each other

China has repeatedly said that it doesn't want a trade war but has also warned that it will take "firm and necessary" countermeasures to defend its interests.

In an opinion article Monday, China's official news agency Xinhua warned that Trump's plans to impose further trade measures on China are a "self-defeating gamble" that will cause harm to the American economy.

"Trump's planned tariffs are not only going to hamper the United States' economic well-being and continued progress, and burden its people with higher costs of living, but also pose a grave threat to the current global trading system," the article said.

Trump has long accused Beijing of stealing American jobs through unfair trade practices. He has promised to bring down the United States' huge trade deficit in goods with China, which reached $375 billion last year. But economists have cautioned that tariffs are unlikely to achieve that goal and risk hurting economic growth instead.

Related: Tariffs, Trump and trade wars: Here's what it all means

So far, though, neither side is backing down.

Experts say they expect further retaliation from China once the Trump administration reveals more details on which products its planned $50 billion in tariffs will target.

Arthur Kroeber, a founding partner at economic research firm Gavekal, predicted in a note to clients late last month that the next round of Chinese measures will focus on US agricultural exports from predominantly Trump-voting states.

China's approach is to show it's willing to stand up to the United States but without going as far as seriously disrupting the global trading system, according to Kroeber.

China wants "to position itself as the good guy in the global economy, protecting the rules of the game from Trump's lawless attacks," he wrote.

-- CNN's Serenitie Wang and Ivan Watson contributed to this report.

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