Tech Sector Happy 25% Tariff Hike Is Tabled but Urges Ending Duties for Good
Tech groups generally hailed Saturday’s White House announcement that the Trump administration won’t raise the third tranche of 10 percent Section 301 tariffs to 25 percent as planned Jan. 1, giving U.S. and Chinese negotiators 90 days to work out a comprehensive deal to curb China’s allegedly unfair trade practices. Some groups complained that left buried under the positive headlines President Donald Trump and Chinese President Xi Jinping generated at the G-20 summit was that three rounds of 10-25 percent tariffs imposed since early July will remain in force indefinitely.
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Trump "at this time" won’t raise the 10 percent tariffs to 25 percent, said the White House. The U.S. and China will “immediately begin” talks on “structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture,” it said. If after 90 days negotiators can't reach an agreement, the 10 percent tariffs will be raised to 25 percent, it said. That would make March 1 the new deadline for a breakthrough.
China agreed to buy “a not yet agreed upon, but very substantial” volume of U.S. products to reduce the two companies' "trade imbalance," said the White House. “If it happens, it goes down as one of the largest deals ever made,” Trump told reporters. It will have an “incredibly positive impact” on agriculture, “industrial products, computers -- every type of product,” he said.
Xi agreed to reconsider Qualcomm’s proposed $44 billion NXP buy, said the White House. “If that deal came back to him, he would most likely approve it quickly, which is a big thing,” said Trump of Xi. The deal fell apart this summer after China regulatory authorities blocked it (see 1807260005). Qualcomm and NXP since have moved their separate ways. Qualcomm paid NXP a $2 billion termination fee to scuttle the agreement and its board authorized a $30 billion stock buyback. NXP launched a quarterly shareholder dividend program and initiated a $5 billion stock buyback. “We do not comment on rumors or speculation,” emailed NXP spokesperson Jacey Zuniga Sunday. Reports Monday quoted Qualcomm as calling the NXP matter closed.
That Trump and Xi were able to "reach consensus" during the G-20 "effectively prevents the further escalation of China-U.S. trade frictions," said a Chinese Foreign Ministry spokesperson Monday: It also "opens up new prospects for win-win cooperation" between the two countries, he said.
The decision to forego for now hiking the tariffs to 25 percent appeared to remove the threat, at least temporarily, of a CTA lawsuit to block the higher duties (see 1810290019). Though CTA applauds Trump’s decision not to raise the tariffs on Jan. 1, “these past five months since the tariffs went into effect hurt U.S. businesses and consumers,” and cost the tech industry "alone" $349 million more on imported goods from China through September, said President Gary Shapiro. “We look forward to continued progress between the U.S. and China -- eliminating the current tariffs and not adding new trade taxes to even more products.”
The “delay” of the 25 percent tariff hike and a return to the negotiating table “are two positive actions that give companies a 90-day reprieve,” emailed Elizabeth Hyman, CompTIA executive vice president-public advocacy. “No long-lasting solution has been accomplished.” Even during the 90-day negotiation period, “many of the damaging tariffs will continue to stand,” said Hyman. “We urge U.S. and Chinese officials to come together and achieve permanent outcomes that will provide tech companies with certainty on a wide variety of issues to include intellectual property protection, cybersecurity, market access and cross-border data flows.”
The Information Technology Industry Council regards the Trump-Xi agreement as a “critical step” toward de-escalating the “mutually damaging” U.S.-China trade war, said CEO Dean Garfield. He urged the two leaders to “seize this opportunity” to “make a deal that rolls back U.S. tariffs and leads to genuine structural and systemic change in China.” The tech industry wants China to take “concrete, measurable actions to end requirements that companies transfer technology, permit the movement of data into and out of China, and increase market access for non-Chinese companies,” he said.
Retailers applaud the administration’s decision “to give diplomacy a chance and at least temporarily avoid the imposition of increased and additional tariffs,” said National Retail Federation CEO Matthew Shay. “The administration has heard the voices of those negatively impacted by existing tariffs. We hope this 90-day tariff pause will lead to a positive resolution that removes tariffs altogether and improves US-China trade relations.”