Confusion over Progress in Trade Talks


Following a White House decision, the U.S. Customs and Border Protection Agency imposed a previously delayed tariff of 25 percent on approximately $200 billion in value of goods imported from China. The White House has also threatened to double down and impose tariffs on approximately $300 million in goods from China.

This action increased the tariff from 10 percent and could represent a deal-breaker in talks that have proceeded through eleven rounds since mid-2018. No announcement was made following the meeting between U.S. Trade Representative Robert Lighthizer and U.S. Secretary of the Treasury and Steven Mnuchin on Thursday and Friday, 9th and 10th May. According to International Trade, almost half of the $540 billion imported from China annually will be subject to the 25 percent tariff. In a countermove, China imposed tariffs on $110 billion of U.S.-origin imports and has implemented a number of administrative impediments to trade.

The White House action was announced following a realization that China might not be negotiating in good faith especially with respect to coercive trade practices and protection of intellectual property.

In unofficial social media posts, the White House has implied that increased tariffs represented  additional income for the Treasury derived from exporters in China. This assertion was corrected by Larry Kudlow in a Sunday Fox News interview. In effect, tariffs are an indirect tax on consumers and are especially damaging to specific sectors including agriculture that rely on exports to China for a number of commodities including soybeans and sorghum. Economists have warned that the intensifying trade war will disrupt global commerce, reduce U.S. GNP by 0.5 percent and could contribute to a recession with a resulting loss of 300,000 jobs.

The tariffs will take effect on shipments loaded from China effective Wednesday, May 8th. There is therefore a window of approximately three weeks representing the duration of trans- Pacific shipping to allow the negotiators to reach agreement without the tariffs being imposed.