President Trump has instructed his top trade representative to consider imposing a 25 percent tariff on $200 billion in Chinese imports, a much stiffer penalty than previously proposed, senior administration officials said Wednesday.
The penalty would apply to a broad range of products, including refrigerators, bedsheets, clothing, furniture and toilet paper. Business groups have warned that such a steep tariff could drive up prices for millions of consumers, and a number of them panned the White House announcement Wednesday.
Cal Dooley, chief executive of the American Chemistry Council, predicted that the 25 percent tariffs would be “devastating for U.S. chemicals manufacturers.”
But White House officials said the potentially steep tariff was necessary to counter what they allege is the Chinese government’s decision to forcefully retaliate against a range of trade restrictions Trump has already imposed.
“We have to keep thinking all the time about whether or not we have the right tools in place to encourage China to change its actions,” said a senior administration official, who spoke on the condition of anonymity under the terms of a call with reporters.
The White House is soliciting public feedback on the proposal, and the new tariffs would not go into effect immediately. The senior administration officials said that the 10 percent and 25 percent tariff levels are under consideration and that a final decision has not yet been made, but they indicated that the White House believes drastic action is needed to force changes from China’s government.
The two senior administration officials on the conference call stopped short of accusing China of purposefully devaluing its currency to try to lessen the impact of Trump’s tariffs. But they said China had taken steps that they had determined could merit a more punitive U.S. response. The value of China’s currency has depreciated in recent months, a sign that some White House officials have noted could be aimed at blunting the impact of the White House’s trade penalties.
If China’s currency is weaker, it makes it cheaper for U.S. companies to buy their products. So even with tariffs added onto the cost of the imports, the prices don’t seem as high. But that could hurt U.S. companies selling goods into China, because their products then become more expensive to Chinese buyers.
The new proposed tariffs are just the latest volley in a slew of economic actions taken by both countries this year, as negotiations have repeatedly faltered.
The White House has already imposed tariffs on a range of Chinese products this year, beginning with steel and aluminum imports and then expanding to $34 billion in items such as industrial equipment. China responded with tariffs on U.S. products, including agricultural items such as soybeans.
Trump then directed U.S. Trade Representative Robert E. Lighthizer to identify $200 billion in Chinese goods that could face a 10 percent tariff, a move seen as a rapid escalation of the trade dispute with Beijing. On July 10, Lighthizer published a 205-page report that specified each item that could be slapped with the higher penalty.
The U.S. imports roughly $500 billion in goods from China each year, so Trump’s new proposal would cover 40 percent of all imports.
Even with this threat, China has so far refused to scale back its retaliation. That’s one reason Trump directed Lighthizer to consider the 25 percent tariff.
Trump is under growing pressure from business groups and Republicans in Congress to show he’s making progress in the multiple trade spats he has opened up with numerous countries. After months of threats, discussions with Mexico and the European Union appear to be bearing fruit, White House officials believe, while talks with Canada and China have stalled.
White House officials say the strong U.S. economy gives Trump negotiating room to try to force other countries to change their trade practices in a way the president says can open up foreign markets to U.S. products, helping American workers. But various U.S. businesses have warned that if the situation remains unresolved, it could hurt the economy and lead to job losses.
“These punitive tariffs will be passed along to U.S. consumers and will undo all the positive gains the economy has made in recent months,” said Matthew Shay, chief executive of the National Retail Federation, a U.S. trade group. “Quite simply, there has been no better example of cutting off one’s nose in order to spite the face.”
Dooley, of the American Chemistry Council, said China had made clear it would further retaliate if the new tariffs go into effect, a prospect that frightens many U.S. companies worried about getting caught in the middle of a trade war.
“Our allies are ready to work with us to put multilateral pressure on China to curb its unfair and discriminatory practices,” Dooley said. “We implore the president to let this be the final provocation and negotiate with China to bring an end to this trade war.”
A number of GOP leaders have said they consider tariffs to be a form of taxation that should not be the primary trade enforcement tool used by the White House, but so far Congress has done little to intervene with Trump’s approach. Labor groups have remained mostly split on Trump’s approach with China, with some backing his push to create more U.S. jobs but others worried about whether the White House has mapped out an endgame and has a plan to resolve tensions.
Trump and his senior advisers have said they are cracking down on Beijing for what they believe are unfair trade practices, particularly the way Chinese companies steal intellectual property and technology from American companies.
Asked about the effect of higher tariffs, the senior administration officials didn’t offer an economic impact. Rather, they said the best long-term solution for U.S. workers and consumers would be changes in China’s practices.
“We are trying to get China to change behaviors,” one of the officials said. “And that’s going to be the best outcome for all of these people over the long run.”