Yellen says Chinese response possible on expected US tariff action

By Andrea Shalal and Susan Heavey

FREDERICKSBURG, Virginia (Reuters) -The United States could see a significant response from China following any U.S. tariff actions, U.S. Treasury Secretary Janet Yellen said on Monday ahead of expected new tariffs targeting certain sectors this week.

Yellen, speaking to reporters after a broadband event in rural Fredericksburg, Virginia, said she and other U.S. officials had made clear to China they could reconfigure tariffs first imposed under former President Donald Trump to be more strategic, but that any changes would be narrowly targeted.

"We've been clear that in reviewing it we may decide that it's appropriate to reconfigure what's been done in a more strategic way," she said.

She declined to give any details of expected changes in U.S. tariffs on China, but said the Biden administration would ensure Chinese officials were informed ahead of any U.S. action.

"President Biden believes that anything we do should be targeted to our concerns and not broad-based and hopefully we will not see a significant Chinese response. But that's always a possibility," Yellen told Bloomberg Television earlier Monday.

Yellen's comments, given ahead of an event on broadband, come as U.S. President Joe Biden is expected to announce new tariffs on Tuesday that will include a large hike on levies for electric vehicles.

The tariffs will also target semiconductors, solar equipment and medical supplies, sources told Reuters last week.

"I have been very clear in my engagement with the Chinese that we believe there needs to be a level playing field for competition, and that we have particular concern about clean energy, semiconductors and areas where China has, through its policies, encouraged so much investment that it's led to overcapacity," she said.

Yellen said she was hopeful that China would recognize that U.S. actions were targeted, and declined to speculate on any possible retaliatory measures by Beijing. "We're going to try to keep our actions targeted, and we'll see what happens," she said.

Yellen said Chinese was pursuing a conscious industrial policy that targeted investments in advanced manufacturing which were leading to global overcapacities that could wipe out competition by U.S. companies.

She noted that virtually all Chinese investment that had been going into its property sector was now going into advanced manufacturing, given problems in the real estate sector.

She underscored U.S. interest in continuing trade with China and stabilizing relations to ensure any disagreements could be discussed.

Asked by Bloomberg if the United States wants a trade war with China, Yellen said: "We're working to stabilize our economic relationship. We do not wish to disengage from China economically, but we do think that the playing field should be fair, and China engages in unfair practices like massive subsidies."

(Reporting by Susan Heavey and Andrea Shalal; Editing by Doina Chiacu, Caitlin Webber and Nick Zieminski)