Trump-Tweet Threat Real -- Tariffs Rising to 25% at 12:01 a.m. Friday, Says USTR

Lighthizer told reporters Monday that the Chinese reneged on terms they had agreed to earlier in the negotiations, but he wasn't specific. He and other Trump administration officials said a comprehensive trade deal was 90 percent done, but took a wrong turn in the past week, a clear indication that things did not go well in last week's talks in Beijing.

The uproar over Trump's tweet of the tariff hike overshadowed industry’s tepid response to Trump’s accompanying threat to impose 25 percent tariffs “shortly” on $325 billion more in Chinese goods previously “untaxed.” With tariffs of at least 10 percent already in place on $250 billion worth of Chinese goods, that additional tranche would cover virtually all remaining imports to the U.S. from China, including common consumer tech products like TVs, which narrowly escaped the first round of tariffs that took effect during the summer (see 1804040023)

Implementing the tariff hike on just five days’ notice “would roil our markets, damage U.S. businesses and do serious harm to Americans' retirement funds and pensions," said CTA President Gary Shapiro. Trump needs to “understand the Chinese don't pay for these U.S. tariffs -- American families, workers and companies pay for tariffs,” he said. Trump had tweeted that the tariffs China paid in the three rounds of duties imposed since July “are partially responsible for our great economic results.”

Tariffs “are taxes paid by American businesses and consumers, not by China,” said David French, National Retail Federation senior vice president-government relations. “A sudden tariff increase with less than a week’s notice would severely disrupt U.S. businesses, especially small companies that have limited resources to mitigate the impact. If the administration follows through on this threat, American consumers will face higher prices and U.S. jobs will be lost.”

Raising the tariffs “would only continue to harm American consumers and businesses of all sizes and across all sectors,” said Naomi Wilson, Information Technology Industry Council senior policy director-Asia. Threats to hike the tariffs “at this juncture in the negotiations” with China could imperil “the important progress both sides have made” toward reaching a comprehensive trade accord, she said. “We urge the president and his team to stay focused on striking a deal that meaningfully and sustainably addresses China’s problematic policies.”

The existing 10 percent tariffs “are hurting American technology companies and an increase will only do more harm to businesses and consumers who rely on technology to improve their lives at home and work,” said Stefanie Holland, CompTIA vice president-federal and global policy. “We encourage the U.S. and China to continue negotiations in order to strike a deal that protects American technology companies and does not punish consumers.”

Setting the "right foundation for trade with China is strategically important, but additional tariffs are not the solution," said Computer & Communications Industry Association CEO Ed Black. The administration "appears to be overly anxious to get a ‘win' on international trade,” said Black. “We are concerned they may throw key tech issues overboard in an effort to get a quick deal with China." The U.S. “may not soon have another chance” at a comprehensive trade deal that properly addresses "21st century" internet and digital trade issues “if we don't get it right,” he said.

Americans for 10 months “have been paying the full cost of the trade war, not China,” said Tariffs Hurt the Heartland, a coalition of 150 trade groups from various industries. “Doubling down on taxing Americans as a negotiating tactic only makes a bad situation worse.” Hiking the tariffs “isn’t leverage to get a better deal, it’s taking money out of the pockets of hard-working Americans,” said the coalition. It said Congress should “step up to meet this threat head on.”

Virtually all the industry statements ignored mention of Trump’s threat to soon impose 25 percent tariffs on $325 billion of remaining Chinese imports previously untouched in the U.S.-China trade war. “We are very concerned by this escalation and additional tariff hike,” emailed NRF spokesperson Bethany Aronhalt Sunday in reply to our query about the new threat. “If the situation escalated further and we saw tariffs on everything we import from China, thousands of jobs would be lost and the U.S. economy would suffer.” Others didn’t respond Monday to similar email requests for comment.

Industry is skittish to speak out about the threat of additional tariffs because it’s “hard to predict what exactly Trump and this administration will do, considering just last week we were told a deal was coming,” confided one trade group executive. “At the end of the day, American businesses have to take his tweets seriously.”

It's unknown for sure what transpired in the U.S.-China trade talks last week in Beijing or immediately after to spark Trump’s rage to tweet that the negotiations were moving “too slowly.” His reference to China’s “attempt to renegotiate” suggested allegations the other side was reneging on previously agreed terms.

The fate of negotiations in Washington that the White House previously said would begin Wednesday is also unclear. The White House was silent Monday, as was USTR Lighthizer for most of the day. Lighthizer and Treasury Secretary Steven Mnuchin led the U.S. delegation last week in Beijing.

Trump’s tweet doesn’t have the force of law to make a tariff increase effective Friday without a USTR notice in the Federal Register, which Lighthizer said late Monday his office would release Tuesday. Customs expert Ted Murphy with Baker & McKenzie advises viewing Trump’s “bombshell” threat in the “context” of seeking negotiating “leverage” now that the trade talks “may be down to the final stages,” he blogged Sunday. “People should watch to see” if Vice Premier Liu He still comes to Washington this week for talks, said Murphy. “If he stays home, then the proposed increase in duties” likely will take effect because it would signal a deal isn't within reach, he said.

“The Chinese delegation is preparing to travel to the U.S.” for “the next round of consultations,” said a Chinese Foreign Ministry spokesperson Monday, without saying whether Liu will participate. On Trump’s threat to hike the tariffs, “there have been many similar precedents,” said the spokesperson. “China's position and attitude has always been clear and the U.S. knows that very well,” suggesting the Chinese would retaliate as they did after previous U.S. tariff implementations. The “pressing task at the moment” is for the U.S. to “work with China to meet each other halfway” and strike a “mutually beneficial” agreement, he said.

Trump’s tweet imposing the tariff hike was “so out of left field the answer is unclear” to the question of whether CTA would renew its threats from last fall to challenge the duties in court if the increases took effect, emailed a CTA member insider Monday. “Last week in Washington DC the shared wisdom was a deal was coming shortly, would be signed in June in Japan at G20 and the remaining question was whether the current tariffs would come off or remain. Certainly no one was expecting this tweetstorm and threats. So, I think we all will wait and see what happens by Friday.” CTA didn’t comment. The G20 Summit is scheduled June 28-29 in Osaka.

CTA hired Akin Gump to draft a complaint challenging the USTR’s authority under the 1974 Trade Act to impose the List 3 tariffs and raise them to 25 percent (see 1810290019), and spent much of the fall shopping the complaint around to other trade groups for legal and financial backing. It shelved the complaint after Trump postponed the tariff increase for 90 days in December (see 1812030002) and delayed it again indefinitely in February (see 1902250001).