President Donald Trump tasked the Office of the U.S. Trade Representative with looking at adding another $100 billion in Chinese goods to the $50 billion already identified as part of the Section 301 investigation. "Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers," the White House said in a release. USTR promptly responded that tripling the size of the tariffs is appropriate, and promised to assemble a list. "Any additional tariffs proposed will be subject to a similar public comment process as the proposed tariffs" announced on April 3 and "no tariffs will go into effect until the respective process is completed," the agency said.
Both the U.S. proposal for Section 301 tariffs (see 1804040019) and the Chinese response (see 1804030070) are likely stage-setting for future negotiations, said Merrill Lynch analysts in an April 4 note to investors. "Despite the exchange of tariff threats, we believe there is still room for negotiation between the US and China," Helen Qiao and Sylvia Sheng said in the research note. "We maintain our view that China will continue its 'carrot and stick approach,' threatening retaliation but also proposing to expand its imports of US products, cut the auto duty, and ease restrictions for US companies investing and selling in China in negotiations," the analysts said. "As a result, we expect the final version of both the US and China trade measures to be more toned down relative to the initial announcement."
Flexport's clients would have paid about $13.6 million in additional customs duties if the proposed Section 301 tariffs (see 1804040019) were in place in 2017, the company's CEO Ryan Petersen said in a blog post. "While Flexport believes that global trade is absolutely essential to a free and prosperous society, our immediate focus in the coming weeks will be on the impact to our clients," he said. "We also believe these algorithmically chosen new taxes -- which were 'drafted to achieve the lowest consumer impact' -- are navigable by a resilient supply chain industry."
China disputed the legality of the Section 232 tariffs on steel and aluminum at the World Trade Organization (see 1803260025), and now the U.S. is disputing both the characterization of those tariffs and how China has responded to them. The tariffs were for national security, and not to protect domestic industry from rising imports, asserted Deputy U.S. Trade Representative Dennis Shea, ambassador to the WTO. China's decision on April 2 to implement tariffs on pork, aluminum scrap and other U.S. exports were not justified, Shea wrote in a letter to China's WTO ambassador, since China can only use the safeguards to respond to safeguards, and the U.S. measures were not safeguards. "China has asserted no other justification for the measures, and the United States is aware of none," he wrote. "Therefore, it appears that China's actions have no basis under WTO rules."
A proposed new 25 percent tariff on imports from China appears to hit machinery, metals and trucks hard, with additional effects on pharmaceuticals, medical devices and optical equipment, according to a list of proposed tariff subheadings released by the U.S. Trade Representative on April 3 (see 1804030055). Other affected products include antifreeze, rubber tires and tubes, televisions, optical instruments and weapons. Comments on the list are due May 11.
China will respond proportionately to any U.S. tariffs implemented as part of the Section 301 investigation, Chinese Ambassador Cui Tiankai said while speaking on an English-language Chinese television station on April 2. If the U.S. does add tariffs as a result of that investigation as expected, "we will certainly take countermeasures of the same proportion, and of the same scale, same intensity," he said. The White House said the total value of goods subject to levies will be $50 billion (see 1803220034). Cui emphasized that the latest tariffs on U.S. imports (see 1804020009) were solely in response to the tariffs on steel and aluminum.
The Office of the U.S. Trade Representative released a proposed list of tariffs on some $50 billion worth of Chinese imports. "Sectors subject to the proposed tariffs include industries such as aerospace, information and communication technology, robotics, and machinery," said the USTR in a news release.
Total U.S. soybean exports could fall by 40 percent if China imposes a 30 percent tariff in retaliation for U.S. tariffs, a new study from Purdue University agricultural economists says. The study, which was paid for by the U.S. Soybean Export Council, estimates that a tariff of that size would cut Chinese purchases of U.S. soybeans by 71 percent. More than 60 percent of U.S. soybean exports go to China. The economists also modeled the effect of a 10 percent tariff. In that case, total U.S. exports could fall by 18 percent, they estimated. Congress members from farm states have been anxious about China imposing retaliatory tariffs against soybeans, seen as a likely target, in response to Section 301 tariffs on China announced March 22 (see 1803220034).
The Office of the U.S. Trade Representative highlighted a handful of gains for U.S. exports in Japan, South Korea, Africa and South America while also highlighting irritants with China, India and Vietnam, in its annual National Trade Estimate Report. Aside from the lowering of trade barriers achieved in the rewritten U.S.-Korea Free Trade Agreement (KORUS), USTR noted that in January 2018, Japan recognized U.S. automobile safety standards for front and rear crashes, "thereby reducing the cost and burden for U.S. auto exporters." It also praised some anti-piracy actions in Peru and counterfeit seizures in Argentina. On the barriers side, the report again laid out the case against China that the Section 301 technology transfer enforcement action is based on. It also complained that India's price controls on knee implants and coronary stents, along with a refusal to allow U.S. companies to withdraw some products from the market, forces the U.S. to sell some products at a loss. "India has indicated it may apply similar price controls on additional medical devices."
An additional two presidential proclamations related to Section 232 tariffs on aluminum and steel were published March 28 in the Federal Register. One new detail was released on how companies can make arguments that the steel or aluminum they import should be excluded from tariffs. The proclamation said the commerce secretary can take "into account the regional availability of particular articles, the ability to transport articles within the United States, and any other factors as the Secretary deems appropriate."