China to Take 'Necessary Countermeasures' Against US Tariff Increase
China will take “necessary countermeasures” if the U.S. follows through on threats to increase tariffs on Chinese goods, according to an unofficial translation of a statement released by the Chinese Ministry of Commerce on May 8. “The escalation of trade friction is not in the interests of the people of the two countries and the people of the world,” the statement said. “The Chinese side deeply regrets that if the US tariff measures are implemented, China will have to take necessary countermeasures.”
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The statement came three days after President Donald Trump said he planned to increased tariffs from 10 percent to 25 percent on $200 billion worth of Chinese goods by May 10 (see 1905060009). Trump’s threat was apparently in response to “reversals” and “backtracking” on the trade deal from the Chinese, according to a May 8 report from Reuters. On May 3, Beijing sent the administration a series of edits to the draft of the trade deal that “deleted its commitments” and “undermined core U.S. demands,” the report said. China reportedly reneged on agreements regarding theft of U.S. intellectual property, forced technology transfers, competition policy, financial services and currency manipulation. A Chinese Foreign Ministry spokesman told reporters on May 8 that “working out disagreements over trade was a ‘process of negotiation’ and that China was not ‘avoiding problems,’” according to the report.
Also on May 8, House Speaker Nancy Pelosi, in an interview with Washington Post Live (see 1905080027), said U.S. Trade Representative Robert Lighthizer told her that China is planning to walk away from the proposed deal this week. China told Washington of its decision late last week, Pelosi said. Both Lighthizer and Treasury Secretary Steven Mnuchin were “taken aback at the extent of the changes in the draft,” Reuters reported.
Reneging on deals at the last moment is a common tactic used by Chinese companies, according to a May 8 blog post by Dan Harris of law firm Harris Bricken, and should not come as a surprise that the government employed the same move. The law firm’s advice to companies who encounter the tactic, and to the Trump administration, is: “Stand firm or get even tougher. It is exactly this sort of common negotiating tactic, among a whole host of other things, that has caused us to be skeptical of the US and China doing a trade deal and skeptical of any trade deal changing much if anything in any event.”
A Chinese official told Reuters that China was not backtracking on the deal, attributing the friction to U.S. demands growing more “harsh” and “the path to a deal more ‘narrow’ as the negotiations drag on,” the report said. China Vice Premier Liu He is expected to arrive in Washington May 9 for two days of trade talks, but U.S. officials have “little hope” that the talks will get “back on track,” Reuters reported.
The American Soybean Association called the recent developments a "worst case" for soybean farmers. "China’s retaliation against U.S. soy farmers has chilled exports to the U.S.’s most important foreign customer," the ASA said. "China has purchased only 5 million metric tons (MMT) of its 20 MMT ‘good faith’ promise, and the original March 1 deadline for concluding negotiations has come and gone. The market has fluctuated with each development during the negotiations, including Trump’s social media posts over the weekend."
ASA President Davie Stephens said that “with depressed prices and unsold stocks forecast to double before the 2019 harvest begins in September, we need the China market reopened to U.S. soybean exports within weeks, not months or longer.” The administration should "hold off on additional tariffs and rapidly conclude negotiations with China, including lifting the existing Section 301 tariffs in exchange for China removing its retaliatory 25 percent tariff on U.S. soybeans," the ASA said. Stephens said "soybean farmers have demonstrated great patience as the Administration has sought to negotiate a better trading relationship with China" but "our patience is wearing thin."