Friday November 16, 2018

April 2018 News

March News | May News

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U.S.-China Trade Issues
U.S.-North Korea Summit Preparations
Boao Forum
Hainan Declared Pilot Free Trade Zone

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U.S.-China Tariffs and Trade Issues

China’s tariffs on a list of 128 U.S. imports went into effect on Monday, April 2. Notable products on the list include pork products ($1.1 billion exported to China in 2017) and wine ($82 million exported to China in 2017). Wine originating from the U.S. was already subject to a 14% tariff, but this will be raised to 29% leaving U.S. wine even less competitive in a market where Australian and Chilean products have no tariffs due to free trade agreements.

President Trump’s second list of Chinese products subject to new tariffs will be released by April 6 for public comment. U.S. businesses that deal heavily in international trade and finance have already made objections. Others, like the Information Technology Industry Council, support targeting China’s unbalanced trade practices, but warn against using tariffs as the primary remedy as “[tariffs] would be a tax on consumers.” The Treasury Department is reportedly considering using the 1977 International Emergency Economic Powers Act, which would allow Trump to restrict Chinese investment in the U.S.. There is also a proposed piece of legislation in Congress that would expand the powers of the Committee on Foreign Investment in the United States. This expansion would allow the Committee to block any type of investment, even if it does not pose a threat to national security.

Update, April 4: The U.S. Trade Representative (USTR) released the list of Chinese products to receive tariffs as a result of the Trump administration’s investigation into Chinese theft of intellectual property. The entire list of 1,300 products would receive a 25% tariff. There will be a public hearing on May 15 for U.S. businesses to make comments. Many businesses are uneasy about additional tariffs.

In response, China announced a new list of tariffs on U.S. imports. China is planning to impose an additional 25% tax on a total of 106 U.S. products, valued around $50 billion. Agricultural products taxed will include: soybeans, corn, cotton, beef, frozen orange juice, and tobacco. Some say China intentionally tailored this list of products to hurt President Trump politically. These new tariffs will have the biggest impact in farming regions, where a great deal of Trump’s supporters are based. With the previous tariffs on $3 billion of U.S. products and the  newly announced tariffs, a third of U.S. exports to China will be taxed. It has not been announced when this new round of tariffs will go into effect.

Update, April 6: On April 5, President Trump announced he has directed the USTR to consider tariffs on an additional $100 billion in Chinese imports. This was in response to the tariffs China announced on April 4. Trump’s announcement was not well received due to fears the back and forth exchange of tariffs is leading to a trade war.

A China’s Ministry of Commerce spokesman stated that China “is not taking any options off the table” if the U.S. follows through. The spokesman also disputed American officials’ claims that the two countries are currently in talks about the issue. If these tariffs are imposed it will bring the total amount of Chinese goods affected to $153 billion. China may struggle to find a proportionate response in tariffs, as they only imported $130 billion of American goods last year.

Update April 17: On April 16, The U.S. Commerce Department imposed a ban on American companies selling components to China’s ZTE Corporation. In 2017, ZTE pleaded guilty to shipping U.S. goods to Iran and North Korea in violation of U.S. sanctions. As part of the agreement reached following their plea, ZTE was to dismiss senior leaders and discipline 35 other employees. While the four senior leaders were fired, the ban has been imposed as a result of ZTE’s failure to discipline the other employees. ZTE represents 30% of China’s telecom market.

Hours after this ban was announced, China’s Ministry of Commerce announced anti-dumping measures on U.S. sorghum as a result of a probe launched in February. Effective April 18, importers of American sorghum must pay a deposit of 178.6%. Sorghum is used in China for animal feed and the distillation of Baijiu, a popular Chinese liquor. The U.S. exported about $1 billion worth of sorghum to China last year, making up more than 80% of total U.S. sorghum exports.

At the Boao Forum on April 10, President Xi Jinping announced that China would be lowering tariffs on foreign automobiles. China’s National Development and Reform Commission (NDRC) has since announced that China will remove foreign investment limits on manufacturing cars. The restrictions will be removed from hybrid and electric cars this year. Eventually no foreign manufactures will be required to have a joint venture with a local company to manufacture cars.

Update, May 1: On April 28, the Chinese government officially revised foreign investment regulations. Western banks and other foreign investors can now own a controlling share in Chinese companies. Previously these investors were limited to a 49 percent share of Chinese companies and had to be involved in a joint-venture with a Chinese company.

On April 30, American business groups met with U.S. Treasury officials to discuss changes to the Committee on Foreign Investment in the United States (CFIUS). Legislators are exploring their options to increase CFIUS’s power to restrict foreign investment in U.S. companies. This is likely to be targeted at Chinese attempts to acquire American high-tech companies. The bill to make these changes to CFIUS has been altered several times already in order to soften its approach.

American trade officials, led by Steve Mnuchin, will meet with their counterparts this week in Beijing. Senior Chinese officials revealed they are not willing to discuss two of Trump’s requests: reducing the trade deficit by $100 billion and reducing government investment into China’s growing high-tech industries. Neither side is confident a deal will be reached by the end of the week and are making arrangements for another meeting in Washington in a month.

March’s Trade Issues News | May’s Trade Issues News

Read More:

Business Insider – China vows to retaliate after Trump threatens new tariffs, and stocks tank
China Daily – China announces anti-dumping measures on US sorghum
Los Angeles Times – In less than 30 days, Trump has risked a trade war with China and alienated U.S allies. Here’s how we got here
NPR Who Wins A U.S.-China Trade War? Maybe Australia
New York TimesLooming China Trade Action Divides Industry and Roils Markets
Quartz – China just rolled out the welcome mat for Tesla
Reuters –
Trump to unveil China tariff list this week, targeting tech goods
Reuters – U.S. ban on sales to China’s ZTE opens fresh front as tensions escalate
Washington Post How trade wars end and why Trump’s will be different
Washington Post – U.S. companies banned from selling to China’s ZTE telecom maker
Xinhua – China imposes tariff on 128 items of U.S. imports

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U.S. – North Korea Summit Preparations

On April 8, the U.S. announced that the North Korean government has directly stated their willingness to negotiate denuclearization. In March, President Trump accepted an invitation made by South Korean officials on North Korea’s behalf, but this direct contact from North Korea officially confirms the summit and the topic of negotiation. A North Korean news agency also announced that Kim Jong Un discussed the upcoming summit during a meeting of North Korean Communist Party officials.

While President Trump has high hopes for the summit, experts on North Korea cautioned that the two countries’ definitions of denuclearization are not exactly similar. North Korea is seeking the removal of the U.S. nuclear umbrella over Japan and South Korea, while the U.S. seeks to dismantle North Korea’s nuclear and missile programs.

Very few details about the summit have been released. It will take place either late May or early June. South Korea’s President, Moon Jae-in, stated that the U.S. and North Korea have been holding “detailed negotiations over the time venue, and agenda” of the summit. Experts familiar with North Korea’s aircraft are speculating the summit will be held somewhere in Asia, as opposed to Europe or across the Pacific in America, because North Korean planes likely do not have the fuel capacity to fly farther.

North Korea’s ties with other countries are also improving. This week a senior Chinese diplomat will be leading an art troupe to North Korea as part of an international art festival. North Korea and South Korea’s own summit is planned for April 27. This is only the third summit between the two since the armistice signed in 1953.  Russia’s foreign minister has accepted an invitation to visit North Korea at an unspecified date.

Update, April 17: On April 17, Bloomberg reported that an unnamed South Korean official revealed South Korea and North Korea will “discuss plans to announce an official end to the military conflict between the two countries” at the upcoming summit. On April 27, South Korean President Moon Jae-in and North Korean leader Kim Jong Un will meet at the Peace House in Panmunjom in the demilitarized zone (DMZ). Should the discussion go well, the U.S. and China will eventually become involved, as both were also signatory to the 1953 Armistice that ended open hostilities

Update, May 1: On April 18, President Trump tweeted that the former CIA Director, and soon to be Secretary of State, Mike Pompeo, made a secret trip to North Korea at the beginning of April. Pompeo met with North Korean officials and leader Kim Jong Un to arrange the details of the upcoming summit between President Trump and Kim.

South Korea also confirmed on April 18 that it had been discussing the signing of a formal peace treaty with American and North Korean officials. This would officially end the Korean War, which began in 1950. A peace treaty would have to be signed by South Korea, North Korea, the U.S., and China – as all were signatory to the 1953 Armistice ending open hostilities.

In the run up to the April 27 summit between North Korea and South Korea, Kim Jong Un announced that North Korea would be suspending nuclear and missile tests and would close a nuclear test facility beginning April 21. Experts have cautioned that there will need to be many more changes before North Korea could be considered “denuclearized.”

On April 27, President Moon Jae-In and Kim Jong Un met in a historic summit. This was only the third Korean summit since the 1950s. The two countries’ leaders announced they have agreed to negotiate a treaty to formally end the Korean War. In order to achieve this, there will be four-way talks between the U.S., China, and both Koreas. The treaty will also need to be approved by the UN. Additionally, There will be efforts to denuclearize the Korean peninsula by the end of the year, which could mean the removal of North Korea’s nuclear arsenal, as well as the removal of U.S. “nuclear-capable forces” from South Korea.

March’s U.S.-North Korea Summit News | May’s U.S.-North Korea Summit News

Read More:

BBC – Kim Jong-un makes first official mention of US talks
Newsweek – KOREAN WAR: PEACE TREATY TO END 65-YEAR-OLD CONFLICT IN THE WORKS, REPORT CLAIMS
New York Times – Trump Lauds Potential North Korea Summit as ‘Very Exciting for the World’
New York Times – China, Feeling Left Out, Has Plenty to Worry About in North Korea-U.S. Talks
The New Yorker – With Pompeo to Pyongyang, the U.S. Launches Diplomacy with North Korea
NPR – CIA Chief Pompeo And Kim Jong Un Met, Formed ‘Good Relationship,’ Trump Says
Quartz – China’s nuclear path may offer a lesson to Trump on how to deal with North Korea
Reuters – North Korea tells U.S. it is prepared to discuss denuclearization: source
South China Morning Post – South Korean leader Moon says peace treaty with the North ‘must be pursued’

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Boao Forum

The Boao Forum for Asia is an economic forum that has been held annually in southern China since 2002. This forum focuses on the development of Asia’s economy and regional integration. This year’s theme is “An Open and Innovative Asia for a World of Greater Prosperity.”

On April 10, President Xi Jinping gave a speech at this forum on China’s economic development, obliquely discussing the tariff spat between the U.S. and China. He did not directly mention the U.S. or President Trump, but stated that China looked to increase imports and would be lowering tariffs on imported vehicles and other products. President Trump had railed against China’s automobile tariffs that same morning.

President Xi also discussed his flagship Belt and Road initiative (BRI). He reassured critics of the BRI that China does not have “geopolitical ulterior motives.” Critics have accused the initiative of acting as a new type of neocolonialism by taking advantage of smaller economies in the region.

Read More:

The Diplomat – Amid a Brewing Trade War, Xi Jinping Addresses the 2018 Boao Forum for Asia: First Takeaways
New York Times – Xi Jinping Promotes Openness at a China Forum Rife With Restrictions
South China Morning Post – Xi Jinping must now meet challenges to deliver on Boao promises
South China Morning Post – China wants to embrace the world, not take it over, Xi says at Boao Forum for Asia
Quartz – Xi Jinping vowed to lower tariffs on American cars after Trump called them “stupid”
Xinhua – Spotlight: Conference-goers welcome China’s further opening-up in Boao

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Hainan Declared Pilot Free Trade Zone

On April 13, President Xi Jinping announced that Hainan province would become an international free trade zone to encourage economic development. This announcement came on the 30th anniversary of Hainan province’s founding and designation as a Special Economic Zone by Deng Xiaoping during his economic reforms.

President Xi believes this proves China’s desire to continue to open up to foreign companies and to promote economic globalization. He described the endeavor as a “free trade port with Chinese characteristics.” Hainan’s development will be focused on growing tourism, the service industry, and high-tech sectors.

Read More:

Reuters – China to set up free trade zone in southern island province of Hainan
Xinhua – China plans to build Hainan into pilot free trade zone

 

Page updated: May 1

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