Friday November 16, 2018

PRESIDENT TRUMP ENACTS TARIFFS TARGETING CHINA

March 28, 2018

White House Official Photo

White House Official Photo

On March 1, President Trump announced his plan to impose 25% tariffs on steel imports and 10% tariffs on aluminum. This announcement was widely met with criticism both at home and abroad. More than 100 Republicans from the House of Representatives wrote a letter to the White House asking the President to “reconsider broad tariffs to avoid unintended negative consequences.” The letter also expressed concern that the tariffs would harm close U.S. allies, such as Canada. Others, including Democratic Senator Joe Manchin from West Virginia, praised the tariffs for protecting American industries.

In response to Trump’s announcement, the European Union threatened to levy tariffs of its own on a wide variety of U.S. products, including classic symbols of American culture such as peanut butter, blue jeans, and Harley-Davidson motorcycles. Chinese Foreign Minister Wang Yi also warned that “China will certainly make an appropriate and necessary response.” The tariff announcement came as Liu He, President Xi Jinping’s top economic advisor, was meeting with U.S. officials in Washington DC.

President Trump signed the orders on March 8. The version he signed excluded Canada and Mexico from the proposed barriers to steel and aluminum imports. After further negotiations, the tariffs went into effect on March 23 with exemptions for close allies of the U.S., meaning the European Union, Argentina, Australia, Brazil, South Korea, Canada, and Mexico all avoided the heavy tariffs.

On March 22, just three weeks after his initial announcement, President Trump signed a presidential memorandum imposing tariffs on China’s high-tech sector as well as limiting opportunities for Chinese investment in the United States. President Trump took these actions in response to the results of an eight-month Section 301 investigation into China’s theft of American intellectual property (IP). The investigation concluded that China has been engaging in unfair trade practices. Among these practices was a requirement that foreign companies turn over important technology, usually protected by patents, to Chinese firms before they would be allowed to do business in China.

The U.S. Trade Representative’s office will develop a list of targeted products and will release it to the public on April 6. This list will be subject to public feedback before being finalized.

The stock market dropped sharply immediately following Trump’s announcement. However, by March 26 the markets were already recovering in response to reports of ongoing talks between U.S. Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He. Still, numerous business sectors in the U.S., including Wal-mart, Nike and forty-five various trade associations, have expressed concern about the tariffs. Some are worried about added costs for manufacturers, which will then be passed on to consumers. Many believe this situation will invite retaliatory tariffs and ultimately devolve into a trade war.

On March 23, the day after President Trump announced the second round of tariffs, China revealed it would be placing tariffs on $3 billion worth of American imports including pork, apples, and steel pipes. The U.S. shipped about $20 billion worth of agricultural goods to China in 2017. Of that $20 billion, $1.1 billion was comprised of pork products. Many expected China to levy taxes on soybeans, as China is the United States’ largest destination for soybeans, and the U.S. provides about 37% of the soybeans imported to China. China imported more than $14 billion worth of U.S. soybeans in 2016. Tariffs would likely have a huge effect on prices in both countries. However, according to Ma Wenfang, an analyst at Beijing Orient Agribusiness Consultancy, soy is too significant to tax at this stage: “You don’t start with your biggest bullet.”

Both the U.S. and China have taken their grievances to the World Trade Organization (WTO). The U.S. filed a complaint accusing China of patent theft on March 23. It will also bring a case to the WTO “arguing that China is favoring domestic companies when it comes to licensing.” The Chinese Ambassador to the WTO, Zhang Xiangchen, called on the organization to prevent the U.S. from “wrecking” the WTO with tariffs and IP theft claims. Zhang claims the U.S. needs WTO authorization for IP tariffs, and enacting them without that prior authorization is  “unilateralism” that will ruin the organization. China has also launched a claim with the WTO for  “compensation for lost metal exports.”

A good deal of President Trump’s campaign focused on the trade deficit and unfair practices between the U.S. and China. These tariffs are his biggest steps so far toward affecting the trade deficit. Although President Trump and President Xi appear to have a congenial rapport, the U.S. and China have a particularly tense relationship overall. As the two largest economies in the world, both countries must exercise caution in order to avoid a trade war with potentially catastrophic, global consequences. The U.S. and China may be able to avoid the deterioration of this situation through continued talks between high-level officials and cooperation with multilateral organizations such as the WTO.

 

Read More:

BBC – WTO: US-China trade war would have ‘severe’ economic impact
Business Insider – China is threatening to fire back at the US in Trump’s new trade war
China Daily – China urges reversal of steep new US tariffs
New York Times – 
Trump Moves Ahead With Tariffs in Defiance of Allies at Home and Abroad
Reuters – China urges WTO members: Put U.S. tariff ‘beast back in the cage’
Xinhua – China warns U.S. against putting bilateral trade ties in jeopardy

Compiled and edited by Emily Bulkeley