• Reuters, Bloomberg


As U.S. President Donald Trump dealt a fresh blow to China, with plans to slap tariffs on $60 billion in trade, he also quietly delivered a slap in the face to close ally Japan, which got no exemption from earlier announced duties on steel and aluminum.

Washington’s move to exclude most of its allies but not Japan from the tariffs that took effect Friday is an apparent snub to Prime Minister Shinzo Abe, who has assiduously courted Trump since he was elected.

U.S. Trade Representative Robert Lighthizer also ratcheted up pressure to negotiate a bilateral trade pact with Tokyo, which has been in sporadic talks with Washington on cutting Japan’s trade surplus.

Abe was the first foreign leader to travel to New York and meet Trump in the days after the November 2016 election, presenting him with a golf club worth nearly $4,000 and showering him with praise.

Officials tried to put a positive spin on the recent trade spat, which comes just as Tokyo is seeking to coordinate strategy against North Korea with planners in Washington — an effort complicated by the ever-changing cast of characters at the White House.

“We are aware that U.S. Trade Representative Lighthizer has been saying the U.S. wants to negotiate a free trade agreement,” trade minister Hiroshige Seko told reporters on Friday.

“I understand we will have constructive talks on what’s the best framework for Japan and the U.S., as well as the Asia-Pacific region, under the Japan-U.S. economic dialogue. We want to closely communicate with the United States.”

Trump signed a presidential memorandum on Thursday that will target up to $60 billion in Chinese goods with tariffs after a 30-day consultation period, set to start once a list is published.

For its part, China said it doesn’t fear a trade war with the U.S. and announced plans for reciprocal tariffs on $3 billion of imports from the U.S. in the first response to Trump’s ordering of levies on Chinese metal exports.

China will also pursue legal action against the U.S. at the World Trade Organization in response to the planned tariffs on steel and aluminum imports, the statement said, and called for dialogue to resolve the dispute.

Earlier, Trump had instructed Lighthizer to impose broader tariffs on at least $50 billion in Chinese imports, as recompense for alleged intellectual property abuses. Officials then went on to roll out temporary exemptions for the metals levies for Argentina, Australia, Brazil, Canada, Mexico, the European Union and South Korea, leaving out Japan.

“The U.S. declared a trade war, but China is acting quite restrained. The list that China has announced appears to be a retaliation, but still it is very measured,” said Li Yong, senior fellow of China Association of International Trade. “The move sends a message that China is able to fight back, but we still want a trade peace instead of a trade war.”

The U.S. will impose 25 percent duties on targeted Chinese products to compensate for the harm caused to the American economy from China’s policies, according to a fact sheet released by USTR. The proposed product list will include items in aerospace, information and communication technology, and machinery. The USTR will announce the proposed list in the next “several days,” according to the fact sheet.

“This has been long in the making,” Trump said, adding that the tariffs could affect as much as $60 billion in goods. “We have a tremendous intellectual property theft situation going on” with China affecting hundreds of billions of dollars in trade each year, he said.

As he signed the tariffs order, Trump told reporters, “This is the first of many.”

Eswar Prasad, a former chief of the International Monetary Fund’s China division and now a professor at Cornell University in Ithaca, New York, described China’s response as “an opening gambit … signaling that the imposition of tariffs by the U.S. will elicit what Beijing views as a proportionate retaliatory response.

“China has the ability to inflict significant economic harm on U.S. exporters of certain goods and can also use other overt as well as covert actions such as supply chain disruptions to hurt U.S. manufacturers.”

Policymakers across the world are warning of a brewing trade war that could undermine the broadest global recovery in years. Meanwhile, business groups representing companies ranging from Walmart Inc. to Amazon.com Inc. are warning U.S. tariffs could raise prices for consumers and sideswipe stock prices.

Even central banks, which normally stay above the fray of trade spats, are weighing in. “A number of participants reported about their conversations with business leaders around the country and reported that trade policy has become a concern,” Federal Reserve Chairman Jerome Powell said this week, while cautioning that trade issues haven’t changed the Fed’s outlook. The Bank of England warned Thursday that increased protectionism could have a “significant negative impact” on global growth.

Trump also directed Treasury Secretary Steven Mnuchin to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the U.S. views as strategic, said senior White House economic adviser Everett Eissenstat.

The Trump administration is framing the moves as a major turning point in U.S.-China relations. The proposed tariffs followed a seven-month investigation by USTR into allegations that China violates U.S. intellectual property, under the seldom-used section 301 of the 1974 Trade Act. The U.S. concluded China engages in a range of violations, including policies that force American companies to transfer technology and the accessing of trade secrets through hacking, said Eissenstat.

The initial Chinese response may not be as severe as many fear but the conflict could easily escalate, said Robert Manning, an expert on U.S.-China relations at the Atlantic Council in Washington.

“What you’re probably going to get from the Chinese is a low-key response to try to negotiate their way out of it,” Manning said. “I just worry if it gets really ugly, they may go for the nuclear option.”

He says the nuclear option would be to sell a “couple hundred billion” in U.S. Treasuries, which would tank markets and raise U.S. interest rates.

Trump tried to make it clear he wasn’t trying to provoke China or its leader, President Xi Jinping.

“I view them as a friend. I have tremendous respect for President Xi,” Trump said. But, the U.S.’s trade deficit with China is “the largest deficit in the history of our world,” he said.

Commerce Secretary Wilbur Ross predicted that a strong stand on trade would bring concessions without escalating into a broader conflict. “We will end up negotiating these things rather than fighting over them, in my view,” Ross said.

Before the tariffs become final, there will be a 30-day comment period, the White House said. Trump has also directed his officials to pursue a World Trade Organization complaint against China for discriminatory licensing practices.

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