After 14 months in office Donald Trump is delivering on his campaign promise to crack down on what he has long labelled China’s unfair trade practices by rolling out plans for new tariffs on up to $60bn in Chinese imports and other sanctions against Beijing.
That has provoked fears of a trade war between the world’s two largest economies, with China likely to retaliate against politically sensitive US exports such as soyabeans grown in farm states that swung behind Mr Trump in the 2016 election.
Here are the key points:
There will be tariffs on up to $60bn in Chinese imports
The plan signed by Mr Trump on Thursday calls for tariffs on up to $60bn in Chinese imports in key strategic sectors identified by Beijing in its “Made in China 2025” plan. The move is in response to what the administration says has been a co-ordinated strategy by Beijing to force US companies to hand over intellectual property to do business in China.
The 10 sectors identified in that plan are: advanced IT products; automated machine tools and robotics; aerospace and aeronautical equipment; maritime equipment; modern rail equipment; electric and other “new energy” vehicles; power equipment; agricultural equipment; “new materials”; and biopharmaceutical and other advanced medical products.
A specific list of products to be hit with the tariffs is due to be presented within 15 days. It will be subject to a public comment period after that. Not likely to be included, US officials indicated, are many consumer electronics products, such as iPhones.
The US Treasury will be drafting investment restrictions
Mr Trump’s move comes as many in Washington are growing increasingly concerned over China’s efforts to acquire US technology by buying US companies and investing in tech start-ups.
The order gives the US Treasury 60 days to identify how to create a regime to help limit Chinese investments in key sectors. It will sit alongside the Committee on Foreign Investment in the US, which already scrutinises inbound investments for national security implications.
The new regime is likely to establish new tests, such as whether US companies can invest freely in the same sectors in China. It also may target state-owned companies for additional scrutiny.
Together with reforms of Cfius now being pursued by Congress, the new measures could present major new barriers to Chinese foreign direct investment in the US, which was worth almost $30bn last year and reached a record $45bn in 2016.
The US plans to take China to the WTO over its technology licensing rules
The US argues that China unfairly keeps US tech companies out of China by discriminating against them in its technology licensing regulations. Now, it wants to take them to the international trade court to get Beijing to stop.
Mr Trump has been a regular critic of the World Trade Organization. On Thursday, he said again that the US had been untreated unfairly by the body for years. But in a concession to allies like the EU and Japan, Mr Trump ordered US trade officials to launch a case against China over those licensing rules.
One wrinkle: the case is likely to take more than a year to litigate and it comes as the US is trying to force reform in the WTO’s dispute settlement system by blocking the appointment of new appellate judges.
China is likely to retaliate
What has many trade experts concerned is the risk that the Trump administration’s tariffs could lead to a tit-for-tat retaliation between the world’s two largest economies.
Trade in goods alone between the US and China was worth more than $635bn last year, with US companies exporting a record $130bn in products to China.
Beijing has made clear that it will not take any US action lightly and has already begun to point to potential targets such as Boeing aircraft and US soyabeans.
“China is the largest export market for US aircraft and soybeans, and the second largest export market for automobiles and cotton,” the Chinese foreign ministry pointed out on Thursday.
US soyabean farmers, who have been losing market share to Brazil in recent years, are particularly concerned. The US last year exported $14bn in soyabeans to China. With many US farm communities already suffering the impact of lower commodity prices even a 10 per cent reduction in that number could be painful.