Companies warn Trump against China tariffs

Andrew Mayeda
Bloomberg News

U.S. companies from Walmart Inc. to Inc. are warning President Donald Trump that any sweeping trade action against China could raise consumer prices, increase costs for businesses and hurt stock prices.

Broad-based tariffs on Chinese goods would “trigger a chain reaction of negative consequences for the U.S. economy,” a coalition of more than 40 business groups led by the Information Technology Industry Council said Sunday in a letter to the president. The coalition includes groups representing retailers and makers of everything from toys to wine, while the council represents companies including Amazon, Alphabet Inc.’s Google, Facebook Inc. and Microsoft Corp.

U.S. Trade Representative Robert Lighthizer is leading an investigation into China’s treatment of American intellectual property, and is expected in the coming weeks to hand over its recommendations to address any unfair practices to President Donald Trump. The administration is said to be considering wide-ranging tariffs on everything from consumer electronics to shoes and clothing made in China, according to people familiar with the matter. The administration is said to be considering targeting at least $30 billion of Chinese imports.

After Bloomberg News earlier this month reported the options being considered, Trump tweeted that “the U.S. is acting swiftly on intellectual property theft. We cannot allow this to happen as it has for many years!”

Amid the warnings from business leaders, the Washington Post reported on Monday afternoon that Trump had instructed his staff to double the $30 billion in annual tariffs they had proposed on Chinese products. The report, which cited unnamed administration officials, added that a final decision had not been made and that the president could still change his mind.

Tariffs on electronics, clothing and other products would raise prices for consumers and businesses, negating gains from the tax cuts passed by Congress late last year, the business coalition said. Such measures could also hurt U.S. companies that sell components of products exported from China, as well as raising input costs for American manufacturers, the coalition said.

“The administration is right to focus on the negative economic impact of China’s industrial policies and unfair trade practices, but the U.S. Chamber would strongly disagree with a decision to impose sweeping tariffs,” U.S. Chamber of Commerce chief executive officer Thomas Donohue said in a statement. “Simply put, tariffs are damaging taxes on American consumers.”

Slapping tariffs on imports of information and communications technology products from China would reduce U.S. investment in innovation and lower productivity growth, according to a report by the Information Technology and Innovation Foundation. Tariffs of 10 percent would reduce U.S, output by $163 billion over the next decade, while a 25 percent penalty would curb output by $332 billion over the same period, according to the foundation.

“I’m glad they think it’s a big problem, because we’ve been saying this for years,” Robert Atkinson, president of the ITIF, said of USTR’s focus on China’s alleged disregard for U.S. IP. “With the tariff approach, I worry that the Chinese could effectively retaliate, for example by going after some key U.S. exports to China, like aviation.”

USTR has argued that China uses a range of practices to force companies to transfer IP, and Chinese entities engage in widespread theft of U.S. trade secrets, as it seeks to become a leader in advanced manufacturing and artificial intelligence. U.S. businesses in China have long complained about being forced to hand over technology as the price of gaining access to the market.