More tariffs could still be ahead in US-China trade spat
July 18, 2019
Thinking things have been relatively quiet on the US-China trade dispute front? We can change that for you.
While the two countries have resumed trade talks, there are indications that a deal isn’t close to happening soon. On July 16, President Donald Trump said that he hasn’t ruled out imposing additional duties on Chinese imports, despite reaching a tariff truce with China in late June.
“We have a long way to go as far as tariffs where China is concerned, if we want. We have another $325 billion we can put a tariff on if we want,” President Trump said during a Cabinet meeting. “So we’re talking to China about a deal. But I wish they didn’t break the deal that we had.”
The statement came just a few weeks after President Trump and China’s Xi Jinping reached a tariff ceasefire when meeting on the sidelines of the G20 summit in Japan at the end of June. The two leaders agreed to suspend additional duties and resume trade talks that broke down in May.
Responding to the President’s remarks, China said more duties would complicate the renewed negotiations. Chinese officials previously said there won’t be a deal unless the US removes all tariffs put in place during the year-long trade dispute.
“If the US imposes new tariffs, this would create a new obstacle for US and China trade negotiations, would make the road to coming to an agreement longer,” China’s Foreign Ministry spokesman Geng Shuang told reporters in Beijing. “China still hopes to resolve US-China trade frictions through consultation and dialogue.”
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Agricultural sticking point
As with many trade negotiations of late (looking at you, USMCA), agriculture has become a sticking point for discussions between the US and China.
Following the G20 summit, President Trump said that in exchange for not imposing more tariffs on Chinese imports, President Xi agreed to bump up the amount of US farm goods China purchases.
But The New York Times reported that Chinese officials say no such agreement was reached. Plus, there hasn’t been an increase in American farm goods purchased by China since the meeting took place in June. In fact, according to data from the US Department of Agriculture, the amount of US farm products purchased by China has decreased since the G20 summit.
Earlier in July, President Trump claimed China wasn’t keeping its promise to buy more agricultural goods from the US. “China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would. Hopefully they will start soon!” the President tweeted.
According to Bloomberg, China is considering buying more American farm products, but won’t commit to the increases until there has been concrete progress in the trade negotiations.
However, Larry Kudlow, the White House’s top economic advisor, recently told reporters that the US expects China to soon announce substantial purchases of American agricultural products, reportedly implying that such a move is required for trade negotiations to progress.
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A ruling on a long-standing dispute has also thrown a potential wrench into the trade talks.
The World Trade Organization (WTO) recently ruled that the US could face sanctions from China over certain tariffs that contravene international regulations. The tariffs in question are unrelated to duties that have been applied to Chinese imports in the current trade dispute.
The WTO decision came the same day President Trump said he could still impose more tariffs on China.
China went to the WTO in 2012 to challenge tariffs the US placed on certain goods, including solar panels and steel cylinders. The US said it imposed the tariffs because the imports threatened American jobs and businesses due to Beijing allowing Chinese state-owned enterprises to subsidize firms.
In a statement, the Office of the US Trade Representative said the ruling proved that China uses state-owned enterprises “to subsidize and distort its economy.”
But the WTO also ruled that the US incorrectly calculated the duties it imposed in response to the subsidies by using pricing that didn’t follow anti-subsidy rules. If the US doesn’t recalculate those specific tariffs, China can retaliate with new sanctions.
While not directly linked to the current trade dispute, the issue will undoubtedly escalate tensions surrounding negotiations and potentially prolong the process.
What happens next when it comes to a trade deal between the US and China is anyone’s guess at the moment. Just don’t expect anything to happen anytime soon.
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