By MEGAN CASSELLA
President Donald Trump is moving ahead with steps to protect U.S. intellectual property by punishing China with broad investment restrictions, litigation at the World Trade Organization and hefty tariffs on $50 billion worth of Chinese goods. The move, which the White House announced Tuesday morning, reignites trade tensions between the world's two largest economies and ratchets up the pressure just days before Commerce Secretary Wilbur Ross is set to travel to Beijing for further trade talks. A series of tit-for-tat trade actions earlier this year had depressed markets and threatened to harm consumers and industries in both countries, but relations had calmed down after the two sides launched an economic dialogue that led Treasury Secretary Steven Mnuchin to declare just over a week ago that the trade war was "on hold."
Mnuchin and others had noted, however, that Trump wanted to keep the threat of tariffs at the ready, but he was inclined to tone down the trade war rhetoric as discussions were ongoing.
The Trump administration declined to specify on Tuesday what had changed that led the White House to issue its latest announcement. But one administration official said it should be viewed as negotiating leverage rather than as a rebuke of the idea that the trade war is on hold.
"You can't go soft too quickly or you are not going to get where you want to go," the official said.
Still, the sudden statement caught officials from Washington to Beijing by surprise and angered those who had welcomed a calming of the waters.
"Trump’s schizophrenic China trade policy is a menace to the global economy," said Dan Ikenson, a trade policy expert at the Cato Institute who criticized the decision to reverse course "yet again." "The president seems to thrive on the uncertainty and chaos that his version of leadership churns out on a daily basis, but whether any of this actually happens is anyone’s guess."
Stocks again fell in light of the news and turmoil in Europe. The Dow Jones industrial average dropped nearly 400 points, or about 1.6 percent, to end the day at 24,361.45. The broader Standard & Poor’s 500 index was off more than 1 percent to close at 2,689.86.
The steps announced Tuesday involve imposing 25 percent tariffs on imported goods from China that include what the White House called "industrially significant" technology and products related to the "Made in China 2025" initiative. The list of targeted goods will be announced by June 15 and the added levy will be imposed shortly after, the White House said.
The White House is also pledging to put in place investment restrictions and stronger export controls in a bid to curb Chinese acquisition of "industrially significant" technology, which will be announced by June 30 and imposed shortly after. The administration will also continue a WTO case launched in March on accusations that China's intellectual property practices violate international trade law.
All three measures are being taken as a result of a seven-month investigation the Trump administration began into China’s handling of data and intellectual property, which wrapped up in late March. The White House argues as a result of that investigation that Beijing commits IP theft and forces foreign companies to hand over valuable data in order to operate in the Chinese market and compete with domestic firms.
But China is sure to retaliate against the latest measures, as it has made clear that it will respond in kind to any tariffs the Trump administration levies against its exported goods. On Tuesday, China's Ministry of Commerce said it was "surprised" by the White House's announcement but also called it "somewhat expected."
"This is obviously contrary to the consensus reached between the two sides in Washington not long ago," a spokesperson said, according to an informal translation. "No matter what measures the United States takes, China has the confidence, ability and experience to safeguard the interests of the Chinese people and the country’s core interests. China urges the United States to act in accordance with the spirit of the joint statement."
Last month, China promised to respond in kind to Trump's proposed tariffs on $50 billion in goods with its own fees on the same dollar value in imports from the U.S. of amount on soybeans, chemical products and other items. Those would come on top of the tariffs on $3 billion in goods in place as of early April on U.S. shipments to China of pork, fruit, nuts, recycled aluminum and other goods.
There had been some hope among free traders and the anti-tariff camp that the higher set of tariffs would never ultimately go into effect after the two countries launched a trade dialogue earlier this month in Beijing. After Trump administration officials traveled to China at the start of the month, a Chinese delegation came to Washington two weeks later, and the two sides announced that Beijing would buy significantly more U.S. agricultural and energy products in a bid to reduce the bilateral trade deficit.
Many in the business sector urged the Trump administration to once again withdraw its threat to impose tariffs, even as they remained supportive of the need to crack down in some way on China's intellectual property practices.
“Tariffs do not work — point blank," said Dean Garfield, the president and CEO of the Information Technology Industry Council. "Moving forward with tariffs on goods imported from China will harm U.S. consumers and businesses, and will fail to change China’s discriminatory and damaging trade practices."
On Tuesday, American hog farmers sent out a plea calling on the administration to swiftly resolve disputes with China, saying that is costing producers billions of dollars in lost profits. The group cited research from Iowa State University economist Dermot Hayes, who estimates that U.S. pork producers have lost $2.2 billion on an annualized basis as a result of events leading up to and following China's 25 percent punitive tariff on pork.
And on Capitol Hill, Senate Minority Leader Chuck Schumer offered muted praise for the announcement but urged Trump not to change his mind again.
"While obviously more details are needed, this outline represents the kind of actions we have needed to take for a long time, but the president must stick with it and not bargain it away," he said in a statement.
But other Democrats appeared less sure that the announcement was a positive one.
Rep. Bill Pascrell of New Jersey, the top Democrat on the House Ways and Means Trade Subcommittee, said that taking steps to curb China's "cheating" was necessary but expressed concern about the rollout of the announcement, which "seemingly no one knew" was coming.
"The chaos and incoherence of this administration’s approach is more head-spinning than a pinball machine," he added.
Doug Palmer and Ben White contributed to this report.
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