Service on WTO and Trade Issues (Aug19/04)
delay imposing additional tariffs on Chinese goods
Geneva, 14 Aug (D. Ravi Kanth) - The Trump administration appears to have developed cold feet in escalating its trade war with China, as Washington delayed until 15 December 2019, levy of the 10% additional tariff on several Chinese consumer products worth around $160 billion.
While toning down his trade war rhetoric with China on 13 August, President Trump intensified his multilateral trade war against developing countries for availing the special and differential treatment (S&DT) at the World Trade Organization.
At a political rally in Pennsylvania on 13 August, President Trump threatened that Washington will walk out of the WTO unless China and India among other developing countries are excluded from the list of developing countries for availing S&DT at the WTO, according to a report in the Washington Trade Daily (WTD) on 14 August.
These two developments marked a pattern of deploying coercive and muscular trade strategies under the banner of the "America First" trade policy, said trade envoys, who asked not to be quoted.
As regards the postponing of 10% tariffs on Chinese goods until 15 December, the Trump administration excluded sensitive consumer goods from China such as cell phones, laptop computers, video game consoles, certain toys, and certain footwear and clothing products among others.
However, the US administration will impose tariffs of 10% on the rest of the Chinese products estimated at around $140 billion from 1 September.
In a move to placate the concerns expressed by powerful American import and manufacturing lobbies, President Trump has dramatically changed his stance in a matter of two weeks.
On 1 August, he threatened China that the US will impose 10% additional tariffs on Chinese goods worth $300 billion, claiming Beijing has not apparently fulfilled the promise it had made at the G20 leaders' meeting in Osaka last month to purchase unlimited quantities of American farm products.
In quick response to President Trump's threat of 10% tariffs on $300 billion of Chinese products, Beijing cancelled all the planned orders for purchasing American farm products.
According to several US media reports, the US farm lobbies are angry over the uncertainty caused by the Trump administration, particularly in Iowa and mid-western American states that are critical for Trump's chances in Presidential elections next year.
According to media reports, the stock markets also disapproved of President Trump's threat of 10% additional tariff on Chinese goods with sharp falls in major markets over the past two weeks.
Against this backdrop, President Trump told reporters in New Jersey on 13 August that he chose to delay some tariffs on consumer goods "for the Christmas season, just in case some of the tariffs would have an impact on US customers, which, so far, they've had virtually none," according to WTD.
Not disowning his repeated claims that China is paying the tariffs, he went on to say that "just in case they might have an impact on people, what we've done is we've delayed it so that they won't be relevant for the Christmas shopping season."
However, the US will stick to its unilateral duty increase of 10% on the remaining Chinese products worth around $140 billion from 1 September, the Office of the US Trade Representative announced on Tuesday.
In a statement issued on 13 August, the USTR said it had published on 17 May "a list of products imported from China that would be potentially subject to an additional 10 percent tariff."
"This new tariff will go into effect on September 1 as announced by President Trump on August 1," the USTR said.
Coming under intense pressure from the American business lobbies, especially the import and manufacturing lobbies, the USTR was compelled to remove "certain products" from "the tariff list based on health, safety, national security and other factors."
It maintained that "products in this group include, for example, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing," suggesting that tariffs on these products will be delayed until 15 December.
Just cell phones and laptops represent about $80 billion of trade with China, which effectively would mean more than a quarter of the tariffs that were poised to take effect, with a 10% levy, in just a few weeks.
The turnaround in the Trump administration's action came after the US trade officials held consultations with the Chinese officials on telephone on 13 August.
Last month, the talks between the two sides produced modest results as several sensitive issues, including the quantum of purchases of farm products by China from the American producers and removal of American restrictions on sale of hi-tech products to China, particularly the Huawei telecommunications company, could not be resolved.
China has consistently maintained that it stuck to its side of the bargain, as part of the understanding reached between President Trump and Chinese president Xi Jinping in Osaka on the margins of the G20 leaders' meeting last month.
Chances of striking a credible deal next month still hang in the balance but the stock market soared on the news of yet another potential thaw in the tensions between the world's two largest economies.
The Dow Jones Industrial Average was up more than 400 points, or nearly 1.7%, in morning trade on Tuesday.
According to the Wall Street Journal of 13 August, "Apple Inc. surged more than 4.5% on news that smart-phones, including its iPhone would be spared until at least December from the proposed tariffs."
The USTR indicated that there will be a process for importers to request exclusions from the additional tariffs, as was done for the previous tranches of tariffs.
So far, the US has imposed 25% tariffs on $250 billion worth of Chinese products.
Following the conversations between the US and Chinese trade officials, President Trump claimed on 13 August that there will be a trade deal with China because of "very, very productive" talks between US and Chinese officials.
The US and Chinese trade officials will hold another round of talks on telephone in a fortnight.
"We had a very good talk yesterday with China - a very, very productive call," the President told reporters yesterday. "I think they want to do something. I think they'd like to do something dramatic."
The WSJ said that "in recent weeks, negotiators have been working on a more limited deal that would have China agreeing to buy more US farm products and the US agreeing to ease off restrictions on China's Huawei Telecommunication Co."
But, leading Senators from the Democratic Party criticized President Trump for not sticking to his decisions.
Senate Finance Committee ranking Democrat Ron Wyden (Oregon) criticized the announcement, saying that US consumers still will be hit by tariffs on books, school supplies and clothing that will take effect on 1 September.
In an analysis prepared by Tariffs Hurt the Heartland,Â a coalition of organizations opposed to the tariffs, the additional 10% tariffs that will begin on 1 September will apply to $112 billion worth of Chinese products.
Clothes account for $25.6 billion of that amount and footwear $7.3 billion. The additional tariffs taking effect on 15 December will apply to $160 billion in imports, including $2.3 billion on clothes and $6.7 billion on footwear.
The two sides agreed to continue their discussions by telephone again in two weeks. A Chinese delegation was originally scheduled to visit Washington in early September for another round of negotiations.
But the Chinese commerce ministry made no mention of plans for face-to-face talks, according to a report in the Wall Street Journal on 14 August.
According to China's Global Times on 13 August, "Chinese experts said the sudden postponing of impending tariffs showed that the maximum pressure tactics of the US are losing their bite when it comes to China."
"These measures are set to greatly reduce the weight of US tariffs, as electronics goods [from China] alone account for about $130 billion," the Chinese daily said.
"The US has realized that its maximum pressure strategy to force China back to the negotiating table has not worked as expected. Washington knows that only through talks can the two sides reach a deal," the paper said, quoting a Chinese banker.
In a separate development on 13 August, President Trump upped the ante against the special and differential treatment availed by developing countries at the WTO.
The WTO, said President Trump, had been "screwing" the United States for years, but that is now changing because members realize that "if it's not going to be fair, it's not going to be at all, we don't need it."
In a speech delivered in Pennsylvania on 13 August, he claimed that the United States had lost almost every WTO dispute it was involved in until he became President.
According to a report in WTD, President Trump claimed: "Now we're winning a lot of cases because they know that they're not on very solid ground. We will leave, if we have to. And all of the sudden, we're winning a lot of cases. We're winning most of our cases. And it's only because of attitude, because we know that they have been screwing us for years. And it's not going to happen any longer. They get it. They get it. So they're giving us victories."
Trump severely attacked the self-designation norm to declare as developing countries for availing S&DT at the WTO.
"Regardless of their size, allowing them to avail themselves of special treatment" is not fair, he said.
Trump said that countries like China and India have been allowed to take "tremendous advantages [because of the S&DT]," the WTD reported.
"But we're not letting that happen anymore, okay? We're not letting that happen anymore," he declared.
Like the trade war with China, which is increasingly becoming a "quagmire", almost akin to the Vietnam war, the Trump administration's decision to bring about differentiation/graduation for availing S&DT by developing countries could prove to be a multilateral quagmire - if the developing countries continue to fiercely oppose the move.