Tech Groups Slam Tariffs on Products Trump Says Are Backed by China’s 'Unfair Industrial Policy'

The memorandum proposes, after a 30-day “public comment” period, to impose 25 percent "additional" tariffs on "certain products that are supported by China’s unfair industrial policy,” said an administration fact sheet. “Sectors subject to the proposed tariffs” will include aerospace, information communication technology and machinery, it said. The memorandum also directs U.S. Trade Representative Robert Lighthizer to address “China’s discriminatory technology licensing practices” through a World Trade Organization “dispute proceeding.” The document tells Treasury to work with other agencies to “propose restrictions on investment by China in sensitive U.S. technology.”

Protecting the U.S. “technology” economy from unfair Chinese trade practices and Chinese theft of U.S. intellectual property is the basis on which Trump is invoking his Trade Act Section 301 authority to impose the tariffs, Lighthizer said at a White House signing ceremony. “Technology is probably the most important part of our economy.” About 44 million people work in America’s “high-technology areas,” he said. “No country has as much technology-intensive industry as the United States, and technology is really the backbone of the future of the American economy.” The memorandum proposes tariffs on “appropriate products,” said Lighthizer. “We can explain later how we concluded what products they are.”

Peter Navarro, director of the White House National Trade Council, told reporters on a conference call that the U.S. is "simply strategically defending itself against this particular form of economic aggression." He said there will be outreach to the country's trading partners to see if they will also put pressure on China to reform its policies. "Everyone faces this problem," he said.

The Chinese embassy in Washington put out a strongly worded statement after Trump signed the memorandum as he promised it would be "the first of many" trade actions against China and others his administration would pursue. "China has demonstrated sincerity in making reasonable suggestions to the U.S., and has made great efforts to address the current trade imbalance between China and the U.S.," said the embassy. "China does not want a trade war with anyone. But China is not afraid of and will not recoil from a trade war."

For importers, the big question now is how much will they be able to shape the list of tariff-targeted products that the memorandum directs Lighthizer's office to release for comment within 15 days, by April 6. Exporters will want to know sooner rather than later what sorts of Chinese retaliation might follow imposition of the tariffs. All involved in trade will be waiting to see whether the total volume of goods shipped gets reduced because of U.S. tariffs and Chinese countermeasures. Commerce Secretary Wilbur Ross, also speaking at the signing ceremony, said the U.S. "will end up negotiating" better terms with the Chinese, "rather than fighting over them, in my view."

Shapiro hailed the administration’s decision to seek comments on the proposed tariffs as “a welcomed first step.” But tariffs and trade wars “risk the nearly 2.5 million American jobs associated with trade involving technology products,” he said. The imposition of tariffs against Chinese imports “threatens U.S. economic growth and wipes out the benefits of our recent tax reform,” he said.

The consumer tech industry accounted for more than 10 percent of the U.S. GDP last year, “and projections show 2018 will be a record breaker,” said Shapiro. “The growth of our industry is vital to the economic health of the nation. We must resist erecting trade barriers on tech products that would reduce economic growth and invite retaliation."

Other tech trade groups reacted similarly, acknowledging the need for the administration to address China’s trade practices, while urging the U.S.to act cautiously to invoke measures they fear would spark a trade war. The Semiconductor Industry Association encourages “an outcome that protects U.S. intellectual property in a manner that avoids a costly trade conflict,” said CEO John Neuffer.

The Telecommunications Industry Association agrees China “engaged in a pattern of unfair trade practices,” but is “deeply concerned by the direction of trade remedies the administration has indicated it will take,” said Cinnamon Rogers, senior vice president-government affairs. Imposing 25 percent tariffs on information communications technology goods “would make it more expensive to expand and upgrade American communication networks,” she said.

The Information Technology and Innovation Foundation hails the administration’s efforts to “curb China’s pattern of abusing economic and trade policy to gain unfair advantage in key industries” but cautions against imposing tariffs “on producer goods that support U.S. productivity growth,” it said. “China has systemically broken its promises and subverted the letter and spirit of WTO rules -- and this behavior is getting worse, not better,” said ITIF President Robert Atkinson. “But it is important for the pushback to be carefully targeted and focused on the steps that will have the most leverage over China so that it doesn’t raise prices and dampen investment in the kinds of machinery, equipment, and other technology that drive innovation and productivity across the economy.”

ITIF thinks economic growth will be damaged by levying 25 percent tariffs on laptops, tablets, smartphones, routers and servers -- all the 256 product lines it identifies as information and communications products, it said in a study it released last week. Stephen Ezell, a co-author of the study, said in an interview Thursday that he thinks purchases of these items would decline by 1 percent for each 1 percent their pricing increases, assuming at least some of the tariff costs would be passed along to consumers.

Restrictions on Chinese investments and an equally punitive approach to technology licensing -- especially done in concert with other countries -- is preferable to any tariffs, Ezell said. If tariffs are unavoidable, he said levying tariffs on goods made by Chinese-headquartered producers would be more effective to bring political pressure on China without hurting the U.S. He said apparel, luggage or knickknacks would be better targets than tech goods.

The National Retail Federation agrees “holding China accountable” for unfair trade practices “is important and necessary, but instead, the tariffs proposed by the administration will punish ordinary Americans for China’s violations,” said CEO Matthew Shay. NRF urges the administration to “reconsider and instead work with our trading partners to enforce the rules and advance targeted trade remedies,” said Shay.

Though tariffs are “one proposed response” for dissuading future unfair Chinese trade practices, they're “likely to create new challenges in the form of significant added costs for manufacturers and American consumers,” said National Association of Manufacturers CEO Jay Timmons. Tariffs “run the risk of provoking China to take further destructive actions against American manufacturing workers,” he said. “The only way we’ll truly make lasting progress is through a strategic approach that uses both carrots and sticks to accelerate changes to Chinese policies, which should include efforts to forge a fair, binding and enforceable trade agreement with China that requires them to end these practices.”