TRADE IS A TWO WAY STREET
“PROTECTIONISM BECOMES DESTRUCTIONISM; IT COSTS JOBS”
PRESIDENT RONALD REAGAN, JUNE 28, 1986
US CHINA TRADE WAR UPDATE JUNE 16, 2018
PRESIDENT TRUMP ANNOUNCES $50 BILLION IN TARIFFS AGAINST CHINESE IMPORTS IN THE SECTION 301 CASE — CHINA RETALIATES
On June 15th, in the Section 301 case against China’s misappropriation to US intellectual property rights, through the United States Trade Representative (“USTR”), President Trump announced tariffs on $34 billion of Chinese imports. The $34 billion will be followed with tariffs on another $16 billion in tariffs for a total of $50 billion.
As stated in the attached USTR announcement:
The Office of the United States Trade Representative (USTR) today released a list of products imported from China that will be subject to additional tariffs as part of the U.S. response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property.
On May 29, 2018, President Trump stated . . .USTR shall announce by June 15 the imposition of an additional duty of 25 percent on approximately $50 billion worth of Chinese imports containing industrially significant technologies, including those related to China’s “Made in China 2025” industrial policy. Today’s action comes after an exhaustive Section 301 investigation . . . in which USTR found … that China’s acts, policies and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory, and burden U.S. commerce.
“We must take strong defensive actions to protect America’s leadership in technology and innovation against the unprecedented threat posed by China’s theft of our intellectual property, the forced transfer of American technology, and its cyber attacks on our computer networks,” said Ambassador Robert Lighthizer. “China’s government is aggressively working to undermine America’s high-tech industries and our economic leadership through unfair trade practices and industrial policies like ‘Made in China 2025.’ Technology and innovation are America’s greatest economic assets and President Trump rightfully recognizes that if we want our country to have a prosperous future, we must take a stand now to uphold fair trade and protect American competitiveness.”
The target products on the first $34 billion list are set forth in set 1. For those products in set 1, an additional duty of 25% will be levied on July 6, 2018. The Set 1 target list is attached.FIRST SET OF $50 BILLION
A second set of products covering another $16 billion in imports is being examined. The second set will go through a public hearing process to take products off the list. The second set is attached. SECOND SET OF $50 BILLION
There will then be an exclusion process to get products off the list, but it has not been published yet.
There is a lot of machinery and other products on the lists, “containing industrially significant technologies, including those related to China’s “Made in China 2025” industrial policy”. Please look at the lists closely and see if you or your clients will be affected by these actions.
As expected, the Chinese government immediately announced its own retaliation against US exports into China. See attached. CHINA RETALIATION LIST
Section 301 cases are usually settled through a negotiated settlement between the two countries. But it is difficult right now to predict the end game in this Section 301 case. By announcing this $50 billion in tariffs is President Trump trying to increase the US leverage in any negotiations with China? Or is President Trump simply trying to curtail imports from China?
To understand Trump’s trade policy, however, one has to start with a simple fact The US Trade Deficit in goods with the World in 2017 was $810 billion, almost a trillion dollars. The US trade deficit in goods with China in 2017 was $375 billion while the trade deficit in goods with the EC was $151 billion, with Mexico was $70 billion and with Canada was $17 billion.
Trump apparently believes that the US cannot follow the same trade path because the US simply cannot afford it.
One of his key promises in the election is that a President Trump would fix the trade problem. President Trump keeps his campaign promises.
President Trump may simply believe that tough trade politics will lead to better trade agreements. We will just have to wait and see whether President Trump wants to negotiate or simply raise tariff walls against imports inviting retaliation and a trade war.