The big news this week is that President Donald Trump stated Thursday that he will hit all remaining Chinese imports with a 10% tariff to take effect September 1. U.S. and Chinese trade representatives were in Shanghai this week as both sides were trying to resolve their long-standing trade differences. Initial reports were that the talks were “constructive,” but China took a hard line that it would not enact any commitments until the United States agreed to lift all tariffs. Talks are scheduled to resume in September when the increased tariff will go into effect. Many questions remain such as whether the President would remove the tariffs for increased agriculture purchases, whether there will be an exclusion process, whether China will respond and whether China will even continue with the talks under this increased threat.
The Senate Finance Committee this week heard from the automotive industry and other proponents of the agreement. Senator Chuck Grassley (R-IA), who is a vocal proponent of the agreement, remains open to possible improvements but is reticent to re-opening the whole agreement. He remains optimistic that USMCA will be passed in the fall.
Meanwhile on the House side, negotiations continue between Democrats and U.S. Trade Representative (USTR) Robert Lighthizer on changes to the agreement. One proposal is to require Mexico to conduct inspections of factories accused of poor working conditions. The goal is to have a deal in place for when lawmakers return on September 9.
A Japanese representative was in Washington Thursday for talks with USTR Lighthizer to discuss a limited agreement covering agriculture, autos and possibly digital trade. There are reports that President Trump wants to use the 2015 Trade Promotion Authority (TPA) to secure an agreement that does not require Congressional approval. Under TPA, the President may eliminate tariffs of 5% or less without such approval. That means any potential agreement could not completely remove the 25% U.S. tariff on trucks. U.S. dairy producers in particular are hoping for a deal, since they lost ground in the Asian market after the U.S. pulled out of the Trans-Pacific Partnership (TPP).
Miscellaneous Trade Actions:
- Sheldon Whitehouse (D-RI) introduced a bill to revamp the tariff exclusion process, but the USTR does not plan to seek more money to process exclusion requests.
- U.S. Department of Commerce initiated anti-dumping and countervailing duty investigations of imports of utility-scale wind towers from Canada, Indonesia and Vietnam.
- No one likes President Trump’s threat to impose tariffs on French wine in response to France’s digital services tax – not Paris and not U.S. wine drinkers.