Trade war on: Trump approves $50 billion in China tariffs

Nuclear war off, trade war on? Just as the White House celebrates a successful start to a process that might result in the denuclearization of the Korean Peninsula, the Trump administration approved $50 billion in tariffs on its most important partner in the process:

President Trump announced Friday that the U.S. will impose a 25 percent tariff on $50 billion of goods from China. The Trump administration is imposing the tariffs “in light of China’s theft of intellectual property and technology and its other unfair trade practices.”

He also threatened to impose more tariffs, should China retaliate with tariffs of its own. The move could complicate Mr. Trump’s efforts to maintain China’s support in his negotiations with North Korea.

No kidding. The reason Secretary of State Mike Pompeo went to China immediately after the summit in Singapore is to convince Xi Jinping to keep the economic pressure on Kim until full denuclearization takes place. That’s one reason why the decision to suspend joint military exercises makes some sense, although it is also still a fair point for criticism. Those exercises weren’t just provocative to Pyongyang but to Beijing as well. With the suspension, it makes a better case for keeping economic pressure in place for the immediate future, rather than an immediate unwinding of sanctions.

Even with his newfound “friendship” with Xi, Trump insists he has no choice but to open up a new front in a burgeoning trade war:

“This situation is no longer sustainable. China has, for example, long been engaging in several unfair practices related to the acquisition of American intellectual property and technology,” President Donald Trump said in a statement released Friday morning that formally announced 25 percent import penalties on some Chinese-made products.

Since taking office, Trump has publicly touted his relationship with Chinese President Xi Jinping in a reflection of his apparent belief that foreign policy is in large part dependent on the personal relationships between heads of state. He did the same Friday, saying his “friendship with Xi” and U.S.-China relations “are both very important to me.”

“Trade between our nations, however, has been very unfair, for a very long time,” Trump said Friday. “China has, for example, long been engaging in several unfair practices related to the acquisition of American intellectual property and technology.”

The new import penalties will cover what the White House on Friday described as items that “contain industrially significant technologies” it contends are part of Beijing’s plan to “dominate the emerging high-technology industries that will drive future economic growth for China, but hurt economic growth for the United States and many other countries.”

If the issue is intellectual property — and that’s more important than the trade deficit itself, to be sure — then why did Trump let ZTE off the hook? The new agreement puts more limits on ZTE, enough so that it lost a big chunk of its market value even after the deal was announced, but it’s still operating broadly enough to remain a threat. If the idea is to crack down on IP theft, ZTE makes for pretty good leverage, and for less risk of blowback, although clearly not on the punitive scale Trump wants with these tariffs.

China wants to organize the rest of the world against Trump’s trade policies:

Given that Trump currently has trade actions pending against Canada, Mexico, and the EU, that call may resonate more than some would otherwise guess. That depends on just how much of these tariffs actually come into force, too, with all of the above. As CBS points out in its analysis, some of these may be scaled back significantly or eliminated before they ever get put into play. Trump could decide to delay their implementation too, for as long as six months, depending on whether China agrees to negotiate the trading relationship and IP protections:

The Trump administration could implement the tariffs as soon as next week. But some analysts and economists also point out that under the cold-war era Sec. 301 law, the tariffs could be delayed while negotiations continue.

The White House can wait up to 30 days to implement the tariffs once published under the 301 statute, Height Capital’s Allen wrote. It can also delay another 180 days for more negotiation. That might happen if Chinese pressure arises during North Korea talks.

If our other trading partners do rally behind China, that may mean trouble for Trump at the ballot box:

Canada, the EU and South Korea are now subject to more tariffs than the U.S.’s traditional adversaries, according to calculations from the Council on Foreign Relations. Those allies aren’t standing by idly. The EU on June 14 became the latest to solidify its countertariffs to those Trump placed on steel and aluminum that took effect in recent weeks. Mexico and Canada have released retaliatory tariffs of their own.

There are already signs the metal tariffs, on top of those for solar panels and washing machines, are starting to hit some U.S. businesses. Some studies show a trade war, even at this stage, may cost more American jobs than immigration does, a key issue Mr. Trump used during the 2016 presidential campaign when discussing U.S. job losses.

CBS analysts expect quick action on this, but don’t be too sure. Trump can string this out for 210 days, putting the effective implementation date well past the midterm elections. That gives the White House plenty of time to negotiate without directly causing economic pain in the heartland, where these retaliatory tariffs are aimed. He can get the credit for taking a tough posture during that pause, and if a deal gets cut, Trump can then claim victory. Until then, he has the best of both populist worlds, no matter the risk it might do to very necessary alliances in the short run — including his long-shot bid to denuclearize North Korea. Trump’s a gambler, but this is a yuuuuge long shot.

Nevertheless, Trump’s move picked up immediate support from someone not of the usual-suspect class:

I’m pretty sure China will still see them as “tariffs,” though.