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This Week In Trade

Fallout from the G7, deal with Japan and new China tariffs

Posted: August 26, 2019

While President Trump wraps up an eventful G7 leaders summit in France, the trade community is digesting and responding to the weekend whirlwind: An alleged deal in principle with Japan and heightened tensions between the U.S. and China.

Trump announced on Friday evening that he would raise tariffs on Chinese goods. During a press conference on Monday, Trump said he believes China wants a deal. On Saturday, U.S. officials said a deal in principle was reached with Japan that focused on agriculture, industrial tariffs and digital trade.

Congress will return from its August recess next week, but some lawmakers are already weighing in.

“President Trump is right to fight back against China’s well-documented rule breaking and intellectual property theft,” Senate Finance Committee Chairman Chuck Grassley (R-IA) said in response to the administration’s announcement that it would increase tariffs on China. “He’s the first president to take action on a problem that’s been going on for decades. China’s economy is hurting as a result, but so too are U.S. consumers and many sectors in the American economy. Iowa farmers have been particularly hard hit and are at risk of permanently losing an export market. The only way to end this trade war is for China to come to the table and negotiate seriously on an enforceable deal that ends its bad behavior and unfair trade practices. In the meantime, tariffs cannot be the only negotiating tool. Tariffs are not a long-term solution.”

Business groups, which had already panned China’s earlier announcement that it would increase tariffs on $75 billion worth of U.S. goods, warned the president’s continued use of tariffs would not help secure a deal with Beijing.

“Clearly the Trump administration’s use of tit-for-tat tariff hikes are not part of any coherent strategy for China. For two and a half years we have been promised a new and innovative approach, yet what we’ve been given is a 1930s trade strategy that will be a disaster for American consumers, American businesses, and the American economy,” Rick Helfenbein, the president and CEO of the American Apparel & Footwear Association, said in a statement.

“This is not how you negotiate. This is a tit-for-tat exercise that is hurting Americans and distracting from the task at hand -- creating a sustainable trade agreement that solves long-standing and deep-seated issues. The administration needs to rise above the fray and start negotiating for the American people,” he said.

The Retail Industry Leaders Association warned that damage done by tariffs could become permanent. “The President’s continued escalation of tariffs has already rattled the U.S. market,” RILA Chief Operating Officer Brian Dodge said in a statement. “If uncertainty spreads from Wall Street to Main Street, the record expansion we’re enjoying will undoubtedly come to an end and it will be the American consumer, not China, who will suffer. Mr. President, we implore you to end this trade war before the damage is irreversible.”

“Enough is enough -- as evidenced by today's 623 point drop in the Dow, global markets are reeling on fears of a global recession,” Consumer Technology Association President Gary Shapiro said in a statement. “Clearly, tariffs aren't moving us toward a deal with China -- it's time to end the trade war and come to an agreement.”

While Grassley and consumer groups criticized the announcement of new U.S.-China tariffs, Senate Agriculture Committee Chairman Pat Roberts (R-KS) and the National Pork Producers Council were commending the administration for reaching what the U.S. described as a deal in principle with Japan.

But Japanese Foreign Ministry spokesman Takeshi Osuga said the U.S.-Japan talks were still in a preliminary stage, according to the Washington Post. Japanese Prime Minister Shinzo Abe said the two sides were hoping to complete a deal next month’s United Nations General Assembly.

Roberts said the purported deal in principle would be a boon to U.S. agriculture. “I applaud President Trump’s persistence in pursuing a trade agreement in principle with Japan, especially for the U.S. agriculture sector,” Roberts said. “U.S. farmers and ranchers currently face a disadvantage in Japan relative to other countries in the Trans-Pacific Partnership, and this agreement will allow our producers to remain competitive as reliable suppliers. I’m optimistic this deal will benefit both the U.S. and Japan, and it will further strengthen this important relationship.”

The deal with Japan will lead to U.S. pork exports to Japan increasing from $1.6 billion to $2.2 billion over the next 15 years, Dermot Hayes, an economist at Iowa State University, said in an NPPC statement.

“We thank the Trump administration for negotiating a trade agreement with Japan, a market that represented 25 percent of total U.S. pork exports last year," NPPC President David Herring said in a statement. “We look forward to rapid implementation of the agreement as international competitors are currently taking U.S. pork market share through more favorable access.”

The U.S.-Mexico-Canada Agreement will be the main focus of several events in Iowa and Nebraska this week. Inside U.S. Trade will be on the ground in Des Moines, IA, and Lincoln, NE, for the discussions.

Grassley and former U.S. Agriculture Secretary Tom Vilsack on Monday will tour an Iowa dairy facility and take questions from Iowans about USMCA. Rep. Adrian Smith (R-NE), a member of the House Ways & Means Committee, will hold listening discussions with constituents as part of an “ag tour” expected to focus heavily on USMCA.

Events this week

  • The Office of the U.S. Trade Representative on Tuesday will hold a hearing on sub-Saharan African countries’ eligibility under the African Growth and Opportunity Act.
  • Also on Tuesday, the Woodrow Wilson Center’s Asia program will host Taiwan Institute of European and American Studies scholar Chien-Huei Wu to discuss the impact of heightened U.S.-China trade tensions on Taiwan. -- Brett Fortnam (bfortnam@iwpnews.com)