Autos in crosshairs of erupting U.S.-China trade war

WASHINGTON -- The U.S. government on Friday released two lists of products covered by $50 billion worth of tariffs on Chinese imports, including autos and parts purchased by suppliers for domestic production of automobiles.

The 25 percent tariffs are an attempt to stop China from forcing foreign companies to transfer technology to joint venture partners, and also an attempt to deter cybertheft of intellectual property by Chinese government and companies.

China quickly retaliated with tariffs on 659 U.S. imports, worth $50 billion, including U.S. light vehicles, farm goods and other products. About $34 billion of those tariffs will take effect on July 6, on agricultural products. 

"The U.S. has ignored China's resolute opposition and solemn representation, and has insisted on adopting behaviors that violate WTO rules," China's commerce ministry said.

"If the United States takes unilateral, protectionist measures, harming China's interests, we will quickly react and take necessary steps to resolutely protect our fair, legitimate rights," Chinese Foreign Ministry spokesman Geng Shuang told an earlier news briefing.

The China tariffs on light-vehicle imports would have an immediate impact on automakers that export large volumes from the U.S., namely Tesla, Daimler, BMW and Ford Motor. Ford has said it ships about 80,000 vehicles a year to China, including various Lincoln models.

China imports nearly 270,000 U.S.-made light vehicles annually, worth $11 billion. The list of cars and light trucks made in China and shipped to the U.S. is small: the Buick Envision compact crossover and Volvo's S60 sedan. 

Washington's second list

Washington has completed a second list of possible tariffs on another $100 billion in Chinese goods, in the expectation that China will respond to the initial U.S. tariff list in kind, sources told Reuters.

The original list was slimmed down, dropping Chinese flat-panel television sets and other items typically purchased by consumers, following a public comment period. The list still includes autos, including those imported by General Motors and Volvo, owned by China's Geely Automobile Holdings.

"We must take strong defensive actions to protect America's leadership in technology and innovation against the unprecedented threat posed by China's theft of our intellectual property, the forced transfer of American technology, and its cyber attacks on our computer networks," said U.S. Trade Representative Robert Lighthizer, in a statement.

"China's government is aggressively working to undermine America's high-tech industries and our economic leadership through unfair trade practices and industrial policies like 'Made in China 2025.' Technology and innovation are America's greatest economic assets and President Trump rightfully recognizes that if we want our country to have a prosperous future, we must take a stand now to uphold fair trade and protect American competitiveness."

The move comes amid escalating global trade tensions as the Trump administration picks fights with allies and other trading partners to protect domestic industries. China and other countries have threatened to retaliate against various U.S. tariffs they say violate World Trade Organization rules. The business community and most experts say the tariffs are misguided and will hurt the U.S. economy, but in there is agreement that action is necessary in China's case to thwart unfair trade practices. Critics, however, say the better approach is to work on a collaborative strategy with a coalition of partner nations that have similar grievances with China rather than go it alone.

"Imposing tariffs places the cost of China's unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers, and ranchers. This is not the right approach," U.S. Chamber of Commerce President Thomas Donahue said in a statement.

The list of products issued today covers 1,102 distinct products focused on industrial sectors that contribute to or benefit from China's industrial policies, including aerospace, information and communications technology, robotics, industrial machinery, new materials and automobiles. The list does not include goods commonly purchased by American consumers, such as cell phones or televisions.

The first list contains 818 products covering about $34 billion worth of imports, with tariffs effective July 6.

The second set contains 284 proposed tariff lines identified by an interagency committee as benefiting from Chinese industrial policies. These products, worth about $16 billion, will undergo further review and a public comment process before the USTR issues a final determination. Products on this final list could be subject to additional duties.

The USTR's original list included 1,333 proposed products subject to tariff.

The USTR said it will set up a process in several weeks for companies that can't find certain products in the U.S. to request an exclusion from the tariffs, as it has done with recent steel and aluminum tariffs.

One voice heard

Auto suppliers have decried the tariffs, which were first proposed in March after a USTR investigation. Mary Buchzeiger, owner of door-hinge maker Lucerne International, testified at a public hearing last month that the tariffs could put her company out of business by raising costs too high.

Her message apparently got through to the right place. Hinges were left off Friday's list of tariffs. In a statement, Buchzeiger said she was thankful for the decision "to spare my company, community and employees from the unintended consequences of placing a tariff on hinges designed for motor vehicles.

"While I agree the trade deficit with China needs to be addressed, as an industry leader I remain concerned about the impact widespread tariffs will have on automotive companies, suppliers and consumers. I urge careful consideration of future actions, in an effort to prevent sparking and fueling a catastrophic trade war.”  

Eric Kulisch, Reuters and Bloomberg contributed to this report.