WASHINGTON (Sinclair Broadcast Group) — President Donald Trump will soon be making a decision about whether or not to impose billions of dollars in annual tariffs on Chinese goods exported to the United States, according to the U.S. Trade Representative.
In testimony to Congress on Wednesday, Ambassador Robert Lighthizer said Trump will decide "in the very near future" how to address ongoing Chinese trade abuses, specifically in the area of intellectual property theft and technology transfers.
According to reports, the tariffs could apply to $60 billion in Chinese goods annually. The products most likely to be hit with the duties will be consumer electronics, textiles, toys, household goods and other products that the Trump administration determined were developed using stolen U.S. trade secrets or other proprietary information.
The decision will not be finalized until President Trump makes the announcement, Lighthizer said on Wednesday, "But our view is that we have a very serious problem of losing our intellectual property, which is really the biggest single advantage in the American economy."
Companies, entrepreneurs and politicians have been calling attention to the chronic problem of Chinese intellectual property (IP) theft for years. In 2017, the Intellectual Property Commission reported the cost to the U.S. economy of stolen trade secrets, counterfeit goods and pirated software could be as high as $600 billion annually. The principal offender in this arena, the Commission stated, is China.
Lighthizer explained that addressing unfair Chinese trade practices is a critical issue for the Trump administration. "We think it is perhaps the most important thing that will have been done in a long time," Lighthizer said, referring to rebalancing the record-high $375 billion U.S. trade deficit with China.
In response to the problem, Donald Trump has unveiled a number of controversial measures in recent months, starting with the January imposition of tariffs on cheap imported washing machines and solar panels, followed by the February announcement of tariffs on steel and aluminum imports.
The latest package of tariffs could be announced as soon as Friday, according to reports. Those duties have been in the works since August. At that time, President Trump issued a directive instructing the USTR to investigate whether Chinese policy and practices related to intellectual property and technology transfers was harming the U.S. commercially and make recommendations under Section 301 of the 1974 Trade Act.
Amb. Lighthizer refrained from discussing the findings of the Sec. 301 investigation, which will likely be rolled out alongside the president's announcement of new tariffs this week. Instead, he asserted that "without question" the United States has a problem with Chinese intellectual property theft and technology transfer policy, and spoke in broad terms about next steps.
"The remedies, in my judgment at least, would be, one, doing something on the tariff front and two, doing something on the investment front," Lighthizer said. "These are the crucial areas where it comes together."
While most people agree with the goal of stopping unfair trade with China and intellectual property theft, there are concerns that the remedy may be worse than the disease.
"The wrong remedy puts significant American jobs at risk," warned House Ways and Means Chairman Kevin Brady, R-Texas, adding that "indiscriminate tariffs are not the right approach."
Before the administration imposes duties under the Sec. 301 authority, Brady called for a "strong opportunity" for public comment so the administration can properly assess the economic impact. "It's not about whacking down," the chairman said of Trump's approach. "It's about hitting the target, which is China and its bad practices. Not our allies or other sectors."
Brady has met with Trump in recent weeks to push back against the broad-brush steel and aluminum tariffs, which he saw as too broad. He also led a group of 107 Republican congressmen asking Trump to more narrowly target the tariffs against bad actors, like China who has been glutting the global steel market.
Other Republicans expressed concern that Trump, by fulfilling his campaign promise to get tough on China, could end up reversing the benefits of his other policies, specifically tax reform.
Rep. Erik Paulsen of Minnesota warned that the "uncertainty" around the president's trade policy, particularly the tariffs, threatens to "derail" recent economic gains. One Fortune 500 company in his district expects that half of the benefits it received from the corporate tax cuts "will be wiped out by the steel and aluminum tariffs that are being imposed," the congressman asserted.
"We're on pins and needles with the upcoming potential announcement later this week," he added, arguing that imposing tariffs that raise the cost of retail electronics like computers and smartphones, will hurt American consumers.
"I'm all for targeting Chinese intellectual property violations, holding them accountable, but let's be targeted," Paulsen stressed. "Let's just not shoot ourselves in the foot."
Reacting to reports that Trump could raise the trade barriers for some Chinese consumer goods, a group of 45 U.S. trade associations sent a letter to the White House saying that tariffs on electronics, apparel, and other consumer products would translate into higher prices for U.S. consumers. "These increased costs would effectively levy a tax on U.S. consumers and businesses, negating gains for American workers from U.S. tax reform," the group said.
A group of 25 of the nation's largest retailers, including Wal-Mart, Target, Best Buy, Costco and Dollar Tree, sent a similar letter this week, saying duties on Chinese goods will "punish American working families" with more costly household basics. "[W]e ask that any remedy carefully consider the impact on consumer prices," the group wrote.
Lighthizer responded to concerns saying the USTR will be using an algorithm to determine the best approach to "maximize the pressure on China and minimize the pressure on U.S. consumer."
"We have to balance the downstream effect," he noted. "We understand that."
The other most prevalent concern was retaliation. Specifically that America's second largest trading partner, China, will make it even harder for U.S. producers to sell their goods.
The Chinese government directly threatened retaliation on Monday. "China does not want to fight a trade war with anyone. But if anyone forces us to fight one, we will neither be scared nor hide," said Foreign Ministry spokeswoman Hua Chunying.
There has been speculation that China could strike back by increasing duties on U.S. agricultural goods, which account for nearly 13 percent of U.S. exports to China. Similarly, for America's other top exports to China, which are aircraft, electrical machinery, machinery and vehicles.
Lawmakers on both sides of the aisle have warned Trump against starting a trade war, including Republican House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. They have argued that any U.S. duties will automatically be met with retaliatory measures.
Democratic Rep. Sandy Levin of Michigan, whose state has been hit hard by the effects of cheap goods and labor, explained that the threat of retaliation is frequently used to avoid dealing with the problem of China's unfair trade practices.
"I believe there is always the threat of retaliation, but something has to be done," Levin said. "It's always raised that there will be a trade war, there will be retaliation, but that can't be a reason to do nothing."
Levin said the Sec. 301 tariffs will send a message to China and "get their attention," but it cannot be the only remedy to address a host of U.S. trade problems with China.
The Trump administration is "worried about retaliation," Lighthizer said, but believes it will be able to offset the negative consequences to U.S. businesses and consumers in the coming months.
Even if Trump announces new tariffs this week, Lighthizer signaled that the Department of Commerce will be working to finalize the plan by April. At that time, Lighthizer also expects to have finalized the exemptions for the recent steel and aluminum tariffs.
The administration has indicated that Mexico and Canada may be exempt from the tariffs, if the renegotiation of the North American Free Trade Agreement (NAFTA) is progressing. On Wednesday, Lighthizer also said the administration is in talks with Australia, Argentina and the European Union about exempting them from the steel and aluminum tariffs. Brazil and South Korea are also seeking exemptions.
It is not clear whether certain products will be exempt from the Sec. 301 tariffs on China, if Trump decides to put them in place.