Scrap Tariffs, ‘Work With Allies’ on ‘Plurilateral’ Trade Pact, IBM Urges Trump
IBM urges the Trump administration to pursue a “plurilateral agreement among the world’s largest economies” to curb China’s allegedly unfair trade practices, commented the company in docket USTR-2018-0026 in opposition to the third tranche of Trade Act Section 301 tariffs on Chinese imports. IBM thinks that a global agreement with China’s “largest trade and investment partners” could help “establish broad new norms,” it said.
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To start with, the EU and Japan “would be logical, willing partners” in working with the U.S. “to bring about needed updates to China’s terms of access to global markets,” it said. “These nations share many of the concerns about Chinese policies and practices” that the Office of the U.S. Trade Representative described in its Section 301 investigative report, it said.
Even China’s leaders “acknowledge the need to expand market access, having made recent proposals to expand foreign participation in the financial services market,” said IBM. Some sectors of the Chinese economy “are strong candidates for further market liberalization, such as cloud computing services,” it said. “IBM has discussed this topic frequently, and constructively, with Chinese officials at all levels of government.” IBM sees “both a need and an opportunity to work with allies to negotiate updated trade and investment rules that would further open China’s market and deepen reforms.”
The first two rounds of “unilateral tariffs” the U.S. imposed on Chinese imports are “counterproductive,” and IBM urges the administration “not to proceed” with the third, it said. “Tariffs are taxes, first and foremost on American consumers,” and when applied unilaterally “mainly benefit the global competitors of U.S. companies,” it said. Tariffs also risk “ever-increasing retaliatory measures,” and will hamper any U.S. opportunity “to work cooperatively with allies to further open the Chinese economy,” which is, “after all, the principal goal of this exercise,” said IBM.
Though Nvidia doesn't make graphics processing units (GPUs) in China, some of its “platforms and cards” are assembled there, and “third-party resellers and partners” import them to the U.S. under the 8471.50.01 and 8473.30.11 tariff lines, commented the tech company. Those goods are targeted for tariffs of up to 25 percent in the third tranche, “even though the vast majority of their value derives from engineering work in the United States,” said Nvidia. It’s “working diligently” with those partners “to mitigate possible negative impacts on consumers, academics, and researchers,” it said. “However, that work will not be completed before the anticipated time” that the third tranche “comes into effect,” so it’s asking that those products be exempted.
Without a “limited exemption for GPU-powered platforms,” the tariffs will have “a disproportionate impact on U.S. interests, burdening products used by students, researchers, engineers, scientists, and small businesses,” said Nvidia. Millions of American consumers buy Nvidia GPU cards for their PCs, and thousands of small businesses use them to market “custom made-to-order PCs and workstations,” it said. “The GPU is a key differentiator in such systems, and a large driver of the cost.” Nvidia sees “no indicators” suggesting that implementing tariffs on “this narrow class of products would meaningfully affect any of China's acts, policies, and practices that the USTR wishes to influence,” it said.
“Real evidence is starting to mount” that the first two rounds of tariffs are hurting the U.S. economy, commented the American Association of Exporters and Importers (AAEI). “We have seen a cascading effect resulting from the imposition of and pending tariffs on Chinese products as these costs ripple through the supply chain.” Publicly traded companies are finding the tariffs have “negatively impacted” their stock prices, while many others “find themselves in the odd situation of having to pay duties on their own products simply because they are manufactured in China,” it said.
Other “unintended consequences” of the tariffs, said AAEI: (1) Companies are forced to incur higher costs by air-shipping goods from China to beat the tariffs before they take effect; (2) Small- and medium-sized enterprises can’t “absorb” the costs of the higher levies, putting their “solvency” at risk; (3) With the higher tariffs, Customs and Border Protection is requiring importers to increase their “customs bonds,” causing a “financial hardship” for many; (4) Tariffs risk exacerbating “fraudulent transshipping,” which is “already a significant customs enforcement problem.”