August 26, 2019

U.S.-China Trade Tensions Boil Over

Last week began with hopes for new trade discussions between U.S. and Chinese officials. Top White House economic adviser Larry Kudlow told reporters that officials from the two countries had a “productive call” mid-week and that there are still plans for Chinese delegation to visit the United States in September to pick up negotiations.

The week ended, though, with both the Chinese and U.S. governments escalating tensions. Early on Friday, August 23, Beijing announced it would impose new penalties on $75 billion in U.S. products, including automobiles and crude oil, beginning this fall. The Chinese government said it took this step because “U.S. measures have caused the continued escalation of U.S.-China trade tensions, significantly harming American, Chinese and other countries’ interests and seriously threatening the multilateral trading system and the principle of free trade.”

By the end of Friday afternoon, the Trump administration had announced it would raise previously-announced tariffs on products from China. Tariffs on the $300 billion worth of Chinese goods currently taxed at 10 percent will face 15 percent penalties starting September 1 while 25 percent tariffs on a separate $250 billion in products will rise to 30 percent on October 1.

The Office of the U.S. Trade Representative (USTR) said there will be a public comment process for the products subject to the higher tariffs rates, raising questions about whether additional exemptions or adjustments to the list would be made. The USTR will publish additional details about this new policy in the coming days, so please stay tuned to Connecting the Dots for information.

Also on Friday, President Trump told U.S. businesses that they should shut down their operations in China. According to Jennifer Hillman, a trade expert at the Council on Foreign Relations who spoke to The Washington Post  last week, the president “does not have the authority to ‘duly order’ companies to leave China,” but he could prevent future transfers of funds to China by declaring a national emergency (that Congress could override). Still, Hillman said, “[E]ven if all this happened, it would notprovide authority over all of the U.S. investments that have already been made in China.”

By the beginning of the next week, Monday, August 26, President Trump’s rhetoric had cooled a bit. After the conclusion of the G-7 meeting in France, he said he was hopeful the United States and China would reach a deal. (President Trump also claimed that members of his administration received calls from Chinese officials saying they wanted to resume negotiations. As of Monday afternoon, the Chinese government denied any such calls had been made.)

In related news: Reuters reported that the U.S. International Trade Commission voted 3-0 last week to impose anti-dumping and countervailing duties on steel racks from China, imports of which totaled about $200 million in 2017. The decision upholds the U.S. Department of Commerce’s July finding that imports of the product are subsidized and sold in the United States at less than fair value. Imports will face anti-dumping duties ranging from roughly 18 percent to 144 percent and anti-subsidy duties from 1.5 percent to 102 percent.