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This Week In Trade

New tariffs on China take effect while negotiations remain in limbo

Posted: September 03, 2019

The week began with the imposition of another wave of tariffs on China -- but no clarity on next steps, as President Trump and Chinese officials offered different takes on whether another negotiating session between the two sides was imminent.

“We are talking to China,” Trump told reporters on Sunday. “The meeting is still on, as you know, in September. That hasn’t changed. They haven’t changed and we haven’t. We’ll see what happens.”

The U.S.’15 percent tariffs on $112 billion worth of Chinese goods took effect on Sunday.

Asked about a potential meeting in Washington, DC, in early September, however, Chinese Foreign Ministry Affairs spokesman Geng Shuang on Monday reiterated Beijing’s stance that Washington and Beijing must create the “necessary conditions for ongoing consultations between the two sides.”

Trump, meanwhile, continues to voice his satisfaction with the new tariffs. “We are doing very well in our negotiations with China,” he tweeted on Tuesday. “While I am sure they would love to be dealing with a new administration so they could continue their practice of “ripoff USA”($600 B/year),16 months PLUS is a long time to be hemorrhaging jobs and companies on a long-shot...”

Trump’s invocation of “$600B/year” appears to be a further exaggeration of the U.S. trade deficit with China.

“And then, think what happens to China when I win,” he added. “Deal would get MUCH TOUGHER! In the meantime, China’s Supply Chain will crumble and businesses, jobs and money will be gone!”

The president also took aim at the European Union’s trade practices, balking at the idea -- pushed by many in the business community and on Capitol Hill -- of teaming up with Brussels to take on China.

“For all of the ‘geniuses’ out there, many who have been in other administrations and ‘taken to the cleaners’ by China, that want me to get together with the EU and others to go after China Trade practices remember, the EU & all treat us VERY unfairly on Trade also. Will change!” he said on Twitter.

On Sunday, Trump falsely claimed the U.S. agriculture sector was benefiting from tariffs on China. “As you know, some new tariffs get on,” the president told reporters. “We’re taking in tens of billions of dollars. We’re giving some of the money to the farmers. I’m making the farmers more than whole. The farmers are doing better than if China, frankly, were buying I’m taking a piece of the massive amount of tariffs, and we’re giving them to the farmers who have been targeted unfairly by China.”

Farmers categorically disagree with the president on the state of their industry. As Inside U.S. Trade reported on the ground from Nebraska and Iowa, U.S. producers have taken a particularly hard hit from the tariffs and losing markets due to trade tensions.

“China’s the biggest market for our soybeans and everything, so, yes, what comes to mind is our biggest market that we want to try and get back that market. Because it took over 26 years to try and build up that relationship and that market demand,” said Lori Luebbe, executive director of the Nebraska Soybeans Association. “To lose that market share is tough on producers.”

One farmer told Rep. Adrian Smith (R-NE) last week: “We can't run on promises anymore. We need action.”

Smith, a member of the House Ways & Means Committee and is largely a supporter of the president, might take exception to Trump's “more than whole” sentiment as well, having grimaced when asked by Inside U.S. Trade about White House trade adviser Peter Navarro's similar comments last month. “It’s a nice gesture, but it’s not a solution,” he said. “[Farmers] don’t see it as a replacement for good policy.”

While tariffs on China continue to rise, Mexico plans to avoid 5 percent tariffs Trump threatened in June by finalizing the implementation of an immigration agreement with the U.S., according to Mexican President Andrés Manuel López Obrador.

“Amid frank negotiations and dialogue we seek to include -- the way it’s being done now -- the governments of the U.S., Guatemala, Honduras and El Salvador, in the construction of mechanisms for economic reactivation, well-being and development in order to deactivate the migratory phenomenon,” López Obrador said in his annual address to Mexican Congress on Sunday, according to an informal translation.

“That is how we overcome -- with these politics -- the threat in June of imposing tariffs and a possible economic and political crisis, through an immigration agreement that obligates us to be more strict in the application of the law of the matter without violating human rights and salvaging in our favor the recognition that this affair will be dealt with without using force and coercion, instead creating job opportunities and well-being for people in their places of origin,” he said.

Thursday marks 90 days after the U.S. and Mexico announced a deal. The two sides said they would assess by then whether adopted immigration measures have had their intended effect.

López Obrador also laid out a four-point economic plan, which includes promoting “the intensification” of foreign trade and investment. Mexico ratified the U.S.-Mexico-Canada Agreement in June.

But Mexico’s work on USMCA is not done, at least according to congressional Democrats and labor groups. The Mexican government on Friday will release its budget plans -- and the U.S. labor community will be on the lookout for the amount of resources dedicated to implementing labor reforms.

House Democrats have raised concerns about López Obrador's “austere budget” plans and whether they will be sufficient to implement the labor reforms the U.S. labor community wants to see before it will back USMCA. Mexican Ambassador to the U.S. Martha Bárcena has said the funding for the labor roadmap the Mexican government provided U.S. lawmakers in May would be determined this month.

AFL-CIO President Richard Trumka will head a delegation of U.S. labor leaders to Mexico City this week. They seek guarantees from Mexican officials that Mexico will uphold its USMCA labor commitments. The delegation will meet with López Obrador, Labor Secretary Luisa María Alcalde and other officials and prominent lawmakers.

Events this week

  • On Monday, the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University will host a seminar on the state of U.S.-EU relations. Set to speak is Philip Gordon, a fellow at the Council on Foreign Relations and former special assistant to the president and White House coordinator for the Middle East, North Africa and the Gulf Region.
  • On Wednesday, the U.S.-China Economic and Security Review Commission will hold a hearing to review the state of U.S.-China relations. Testifying on the U.S.-China economic relationship will be Victor Shih, the Ho Miu Lam Chair in China and Pacific Relations at the University of California San Diego School of Global Policy and Strategy; Andrew Polk, co-Founder of Trivium China; and Elizabeth Economy, the director for Asia studies at the Council on Foreign Relations. The commission will also meet on Thursday to review its annual report to Congress.
  • The Development Bank of Latin America CAF will hold its annual conference on Wednesday and Thursday. Former U.S. Trade Representative Carla Hills on Wednesday will host a discussion on trade in the Americas with Ambassador Bárcena, former Costa Rican Trade Minister Anabel González, Argentine Trade Minister Marisa Bircher, and the chief economist for the integration and trade sector at the Inter-American Development Bank, Mauricio Mesquita Moreira.
  • The Asia Society on Thursday will host a discussion on the state of the U.S.-China trade dispute with Wendy Cutler, the vice president of the Asia Society Policy Institute and a former acting deputy USTR, and Asia Society Executive Vice President Tom Nagorksi.
  • On Thursday, the Woodrow Wilson Center will examine what the U.S.-China trade dispute means for India during a discussion with New Delhi Institute for Defense Studies and Analyses research fellow Jagannath Panda and Heritage Foundation Asian Studies Center research fellow Jeff Smith.
  • Also on Thursday, the Council on Foreign Relations will host former Rep. John Delaney (D-MD), a longshot Democratic presidential candidate, for a discussion on the future of U.S.-China relations. -- Brett Fortnam (bfortnam@iwpnews.com) with Hannah Monicken (hmonicken@iwpnews.com)