"In light of China’s theft of intellectual property and technology and its other unfair trade practices, the United States will implement a 25 percent tariff on $50 billion (R670 billion) of goods from China that contain industrially significant technologies," Trump said in a statement. "This includes goods related to China’s Made in China 2025 strategic 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."
According to the US Trade Representative's (USTR) office, the tariffs will come in two parts. The first section will be implemented on July 6 and apply to 818 goods with a total value of $34 billion (R456 billion). The second set, which includes 284 goods equal to $16 billion (R214 billion) worth of imports, will come later and be subject to additional public comments.
The list generally hits industrial goods rather than consumer items according to the USTR statement.
"It generally focuses on products from industrial sectors that contribute to or benefit from the 'Made in China 2025' industrial policy, which include industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles," the statement said. "The list does not include goods commonly purchased by American consumers such as cellular telephones or televisions."
"Made in China 2025" is an important economic initiative undertaken by the Chinese government to promote the development of key industries, particularly in the tech sector, over the next seven years.
In addition to Friday's tariffs, the White House is also considering an additional set of tariffs on another $100 billion (R1.3 billion) of Chinese goods. In the statement, Trump said those measures would be implemented only if the Chinese strike back at Friday's move.
"The United States will pursue additional tariffs if China engages in retaliatory measures, such as imposing new tariffs on United States goods, services, or agricultural products; raising non-tariff barriers; or taking punitive actions against American exporters or American companies operating in China," Trump said.
The Chinese government already promised that such a retaliation is imminent. A statement from the Chinese Ministry of Commerce said that the country would implement tariffs on a similar scale on US goods.
Trump's announcement is an escalation of a long-simmering trade battle between the two countries. After some minor skirmishes related to washing machine and solar panel tariffs, Trump struck the first direct blow at China in March with the announcement of tariffs on Chinese goods.
This triggered the promise of retaliation from the Chinese and set off a series of negotiations as the two countries attempted to avoid a trade war.
After talks in Beijing and Washington, DC, a preliminary deal was struck that appeared to put the trade restrictions on hold. But, the White House announced at the end of May that the tariffs would move forward despite the deal.
Greg Valliere, chief global strategist at Horizon Investments, called the tariffs "a significant escalation of the trade war" and warned that there were four primary outcomes from the increasing tensions.
"Our take is that a trade war would bring four negatives – somewhat higher inflation; growing anxiety in the U.S. farm belt; uncertainty that could complicate long-term corporate planning; and a growing estrangement of the U.S. on the global stage.
Louis Kujis, head of Asia economics at Oxford Economics, said that the back-and-forth trade measures will be a modest drag on economic growth but despite the relatively minor hit the tariffs still make a difference.
"Such numbers still matter, and the increased uncertainty and risks will weigh on business confidence and investment, especially cross-border investment," Kujis wrote. "Thus, there will be an impact on growth, in China, the US and elsewhere, at a sensitive time for the global economy."
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