IEEJ：March 2018○ｃIEEJ 2018
Special Bulletin
A Japanese Perspective on the International Energy Landscape (368)March 23, 2018

U.S. Imposing Economic Sanctions on China
under Tougher Foreign Policy Approach
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn March 22, U.S. President Donald Trump signed an executive order to impose higher
tariffs on imports from China as economic sanctions for its alleged theft of U.S. intellectual property.
The higher tariffs will target $50 billion or around 10% of imports from China. President Trump said
the sum could reach $60 billion.
In response to the executive order, the Office of the U.S. Trade Representative (USTR)
will reportedly prepare a list of some 1,300 products for the higher tariffs within 15 days and subject
it to public comment for 30 days before making an official decision to enforce the higher tariffs.
These targets are expected to include high technology products, according to media reports. The
USTR had investigated China’s alleged theft of U.S. intellectual property under instructions byPresident Trump and identified the theft’s harm to U.S. industry. Washington is expected to enforce
the higher tariffs estimated at 25% and restrictions on Chinese companies’ investment in the UnitedStates, invoking Article 301 of the U.S. Trace Act providing for tough trade restrictions. Specificinvestment restrictions will be determined by the Treasury Department within 60 days under
instructions by President Trump, according to media reports.
Behind the tough trade policy approach is the United States’ huge trade deficit with China.
President Trump has criticized China for stealing U.S. intellectual property and urged the Chinese
government to reduce the U.S. trade deficit with China by $100 billion, while the deficit reached ashigh as $375.2 billion in 2017. When signing the executive order, President Trump said the he wasrespecting Chinese President Xi Jinping and that China was a friend. Given that the trade deficit with
China has failed to decline, however, President Trump might have decided to resort to the toughpolicy measure.
President Trump has retained his tough stance against the trade deficit with China since thepresidential election campaigns. Ahead of the midterm congressional election this autumn, President
Trump might be attempting to solidify and enhance his public support by fulfilling his campaign
promises and implementing his “America First” foreign policy for trade strongly in response to his
low public approval ratings.
In addition to the economic sanctions on China, the Trump administration was to invoke
unusual restrictions on steel and aluminum product imports on March 23, as announced on March 1.
The Trump administration announced a 25% tariff on steel imports and a 10% tariff on aluminum1

IEEJ：March 2018○ｃIEEJ 2018
imports under Article 232 of the U.S. Trade Expansion Act, claiming that China’s steel andaluminum overproduction allowed excessively cheap products to flow into the United States to hurt
U.S. production and weaken industrial infrastructure, posing a national security threat to the UnitedStates.
The USTR said seven economies including the United States’ North American Free TradeAgreement partners, the European Union, Australia and South Korea would be exempted from thesteel and aluminum import tariffs. In addition to China as a main target, Japan is also subject to theimport restrictions. The Japanese government sees the import restrictions as regrettable and has
vowed to urge Washington to exempt Japan from the curbs.
Such a unilateral, tough trade policy could trigger a strong, harsh backlash from U.S.
trading partners, a chain of retaliation and even an escalated trade war that could lead to theshrinkage of free trade and the global economy. Particularly, a strong backlash has come from Chinathat has been directly subjected to the economic sanctions.
On March 23, the Chinese Commerce Ministry revealed that it was considering imposing
additional tariffs of up to 25% on some imports from the United States including wine and somefarm products to counter the U.S. restrictions on steel and aluminum imports. The revelation may bedesigned to check the economic sanctions under Article 301 of the U.S. Trade Act that would have agreater impact than the steel and aluminum import tariffs. The Chinese Embassy in Washington on
March 23 expressed strong dissatisfaction with and opposition to the Article 301 sanctions andindicated strong countermeasures in a manner to strongly check the United States.
The stock market reacted to the growing tension of U.S.-China economic friction. OnMarch 22, the Dow Jones industrial average on the New York Stock Exchange plunged by 724
points to 23,958, slipping below 24,000 for the first time in one month and a half since a stock
market crash in early February. In response to the Dow Jones average’s dive, Japan’s Nikkei stock
average also suffered a steep loss, indicating that the impact of the U.S. trade measures would spreadthroughout the world.
Future developments will depend on how tough the specifics of the U.S. sanctions wouldbe, how strong their impact would be, whether these sanctions would be enforced, and how China
and other U.S. trade measure targets would move to counter the U.S. measures. No optimism can bewarranted. New risk factors have rapidly arisen for the U.S. economy and the world economy thathave smoothly grown so far. We must carefully watch future actions by the Trump administrationand major U.S. trading partners.
The U.S. economic sanctions have impressed the world with the Trump administration’s
toughening foreign policy approach. In addition, the Trump administration has recently attracted
attention with key cabinet member replacements. On March 7, Gary Cohn resigned as director of theNational Economic Council over his gap with President Trump over the steel and aluminum importrestrictions. On March 13, the president fired State Secretary Rex Tillerson who reportedly had gap
with the President over some issues on foreign policy. On March 22, the White House announced
2

IEEJ：March 2018○ｃIEEJ 2018that the president’s national security adviser H.R. McMaster would step down. Key administration
officials have thus been replaced one after another.
President Trump has nominated Central Intelligence Director Mike Pompeo as new statesecretary and former U.N. ambassador John Bolton as new national security adviser. Both Pompeoand Bolton are known for their hardline foreign policy approaches. These nominations indicate that
the Trump administration’s foreign and national security policies, including policies on China, North
Korea, the Middle East and Iran, would grow even tougher. The Trump administration’s policy
management in all directions could greatly affect not only the United States but also the world.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

3