TWN Info Service on WTO and Trade Issues (Sept19/04)
18 September 2019
Third World Network

US and China choreograph tariff moves ahead of trade talks

Published in SUNS #8976 dated 13 September 2019

Geneva, 12 Sep (D. Ravi Kanth) – Ahead of their planned trade talks next month, China and the United States seem to have entered into closely-choreographed tariff-related moves that could lower tensions in their ongoing trade war.

However, the temporary reprieve is unlikely to bring about a credible and lasting agreement between the two sides, said several analysts.

On Wednesday, Beijing indicated that it is dropping additional tariffs of 25% imposed on 16 items of imports from the US last year.

The Chinese move, made public on its Ministry of Finance website, is a “big move”, President Donald Trump told reporters at the White House on 11 September.

Although the Chinese list of 16 products do not include major US agricultural products like soybeans that are causing an uproar among American farmers, President Trump termed Beijing’s move as a “big move.”

“I think they [the Chinese] did the right thing … I think it was good for them,” President Trump maintained, insisting that the US would also reciprocate China’s “goodwill gesture,” according to reports in the American media.

The list of 16 products from the US on which China dropped retaliatory tariffs with effect from 17 September are divided into two lists.

Products from the US in the first list will be eligible for refunds for tariffs already paid. It includes other shrimp and prawn seedlings; aster meal and pellets; other purpura (except coarse powder and pellets); fish meal for feed; lubricating oil; grease; ring line, insecticidal ring, insecticidal nail, polythiane, etc. (including methylthiophosphorus, buprofezin, aspartate, indoxacarb); decitabine, fluorouridine, cyclophosphamide, gefitinib, capecitabine, raltitrexed, fludarabine phosphate, fluoride, cytarabine hydrochloride, gemcitabine hydrochloride, ectinib hydrochloride, ifosfamide; non-ionic organic surfactant; mineral oil less than 70 percent lubricant; lubricants containing no petroleum or oils from bituminous minerals; and medical linear accelerator.

The US products on list two are not eligible for refunds for tariffs paid, according to the Chinese statement. The items on the second list include whey for feed; release agent; isoparaffin solvent; and lubricating base oil.

In response to the Chinese announcement, the US president claimed that Beijing is ready to strike a deal because “the US tariffs imposed on Chinese products have caused real harm to the Chinese economy.”

“China wants to make a deal. We will see what happens. We have to make the right deal for this country,” he maintained.

Following his comments to reporters, President Trump tweeted on Wednesday that the US will delay a scheduled tariff increase on roughly $250 billion of Chinese goods on 1 October.

The US President described his decision to postpone the imposition of tariffs as a “goodwill gesture” made at the request of Chinese Vice Premier Liu He, as 1 October marks the 70th anniversary of the founding of the People’s Republic of China.

The US move will delay scheduled tariff increase from 25% to 30% on non-consumer items from China that are used by American businesses as inputs.

President Trump’s decision to increase the tariffs was criticized by the US industry and trade lobbies.

Washington imposed new tariffs on about $112 billion of Chinese products from 1 September, and another round of tariffs on Chinese electronic and consumer items is expected to come into effect from 15 December.

Responding to President Trump’s decision to impose tariffs, China also retaliated by imposing tariffs on politically-sensitive American farm and other products amounting to $70 billion.

In an angry response to the Chinese retaliatory tariffs, the US president made it known that he would further raise the tariffs while ordering American companies to stop trading with China and move their production facilities to other countries.

Trump announced on Twitter that he will raise tariffs on $250 billion of Chinese goods, up from 25%, with effect from 1 October.

Trump’s tweets and actions were rebuked by the American trade and industry lobbies, and accentuated fears of recession in the global economy, according to The Wall Street Journal.

“Since the business backlash following the tweet, the Trump administration has sought to de-escalate the trade war,” the WSJ reported on 12 September.

Nevertheless, the so-called goodwill gestures are unlikely to bring about a lasting and credible trade deal between the two sides which seem to be sharply divided on various issues.

“The negotiators have had a year to come to an agreement, and they remain structurally at odds on key issues”, said Andrew Polk, co-founder of research firm Trivium China in Beijing, according to a report in Bloomberg on 12 September.

The US is insisting on major structural changes in the Chinese economy such as sweeping changes in the intellectual property laws, elimination of mandatory transfer of technology, doing away with industrial subsidies for the state-owned enterprises, and drastic changes in rules and restrictions in China’s electronic commerce, including removal of restrictions on storing of the data as well as on cloud computing.

“The US decision to postpone extra tariffs is good for the upcoming China-US trade talks, but what US President Donald Trump has done is far from enough and we should not consider it a breakthrough in trade talks, as they remain very tough,” experts told the Global Times on Thursday.