China on Wednesday issued a $50 billion list of U.S. goods including soybeans and aircraft for possible tariff hikes in an escalating technology dispute with Washington that companies worry could set back the global economic recovery.
The country’s tax agency gave no date for the 25-per-cent increase to take effect and said that will depend on what President Donald Trump does about U.S. plans to raise duties on a similar amount of Chinese goods.
Beijing’s list of 106 products included the biggest U.S. exports to China, reflecting its intense sensitivity to the dispute over American complaints that it pressures foreign companies to hand over technology.
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The clash reflects the tension between Trump’s promises to narrow a U.S. trade deficit with China that stood at $375.2 billion last year and the ruling Communist Party’s development ambitions. Regulators use access to China’s vast market as leverage to press foreign automakers and other companies to help create or improve industries and technology.
A list issued Tuesday by the U.S of products subject to tariff hikes included aerospace, telecoms and machinery, striking at high-tech industries seen by China’s leaders as the key to its economic future.
China said it would immediately challenge the U.S. move in the World Trade Organization.
“It must be said, we have been forced into taking this action,” a deputy commerce minister, Wang Shouwen, said at a news conference. “Our action is restrained.”
A deputy finance minister, Zhu Guangyao, appealed to Washington to “work in a constructive manner” and avoid hurting both countries.
Zhu warned against expecting Beijing to back down.
“Pressure from the outside will only urge and encourage the Chinese people to work even harder,” said Zhu at the news conference.
Companies and economists have expressed concern improved global economic activity might sputter if other governments are prompted to raise their own import barriers.
The dispute “may compel countries to pick sides,” said Weiliang Chang of Mizuho Bank in a report.
American companies have long chafed under Chinese regulations that require them to operate through local partners and share technology with potential competitors in exchange for market access. Business groups say companies feel increasingly unwelcome in China’s state-dominated economy and are being squeezed out of promising industries.
Chinese policies “coerce American companies into transferring their technology” to Chinese enterprises,” said a USTR statement.
Foreign companies are increasingly alarmed by initiatives such as Beijing’s long-range industry development plan, dubbed “Made in China 2025,” which calls for creating global leaders in electric cars, robots and other fields. Companies complain that might block access to those industries.
A report released Tuesday by the USTR also cited complaints Beijing uses cyber spying to steal foreign business secrets. It was unclear whether the latest tariff hike was a direct response to that.
The Chinese list Wednesday included soybeans, the biggest U.S. export to China, and aircraft up to 45 tons in weight. That excludes high-end Boeing Co. jetliners such as the 747 and 777, leaving Beijing additional high-profile targets for possible future rounds of the conflict.
Also on the list were American beef, whisky, passenger vehicles and industrial chemicals.
Zhu expressed thanks to American soybean farmers who he said had lobbied the Trump administration to “safeguard hard-won economic relations between the United States and China.”
The Global Times newspaper, published by the ruling party and known for its nationalistic tone, suggested further retaliatory action might target service industries in which the United States runs a trade surplus. Regulators have wide discretion to withhold licenses or take other action to disrupt logistics and other service businesses.
“What China needs to do now is to make the United States pay the same price” so Americans “understand anew the Chinese-U.S. strength relationship,” the newspaper said.
In a separate dispute, Beijing raised tariffs Monday on a $3 billion list of U.S. goods including pork, apples and steel pipe in response to increased duties on imports of steel and aluminum that took effect March 23.
The United States buys little Chinese steel or aluminum, but analysts said Beijing would feel compelled to react, partly as a “warning shot” ahead of the technology dispute.
In another warning move, Chinese regulators launched an anti-dumping investigation of U.S. sorghum last month as rhetoric between Beijing and Washington heated up.
China has accused Trump of damaging the global system of trade regulation by taking action under U.S. law instead of the through the WTO.
Previously, Trump approved higher import duties on Chinese-made washing machines and solar modules to offset what Washington said were improper subsidies.
The technology investigation was launched under a little-used Cold War era law, Section 301 of the U.S. Trade Act of 1974.
However, as part of its response, the USTR also lodged a WTO case last month challenging Chinese policies it said unfairly limit foreign companies’ control over their technology.
U.S. authorities say Beijing denies foreign companies the right to block use of technology by a Chinese entity once a licensing period ends. And they say it imposes contract terms that are less favourable than for local technology.