White House Trade Adviser Peter Navarro's remarks that the U.S.-China phase one trade deal was “over” were “just groundless and absurd,” responded a Chinese Foreign Affairs Ministry spokesperson Tuesday. “He’s always full of lies and has zero credibility.” The “turning point” that derailed the agreement came after Chinese officials traveled to Washington to sign the phase one deal Jan. 15, “a full two months after they knew the virus was out and about,” Navarro told Fox News Monday. “The China Trade Deal is fully intact,” tweeted President Donald Trump hours later. “Hopefully they will continue to live up to the terms of the Agreement!”

Of the nearly 53,000 exclusion requests U.S. importers filed for relief from the Trump administration's Trade Act Section 301 tariffs on Chinese goods, 75.4% were denied, and 12.3% are pending, said a Congressional Research Service report Friday. Since most exemptions don't correlate with a single Harmonized Tariff Schedule number, it's not possible to know how much trade the exclusions represent, said CRS. As the administration makes "more active use of Section 301 authorities to pressure other countries to eliminate their trade barriers, Congress could consider amending Section 301," the report said. "It could establish a formal product exclusion process or set specific guidelines for when and how to grant exclusions." The Office of the U.S. Trade Representative didn't comment Monday.

President Donald Trump was wrong in suggesting the U.S. could sever ties with China, said a Chinese Foreign Affairs Ministry spokesperson Friday. “In this era of globalization, the interests of all countries are closely intertwined,” he said. “Global industrial and supply chains are formed and developed in such ways as determined by market forces and business decisions. As such, it is unrealistic and insensible to try to sever them or wish political forces would override economic law. Such practices will not help solve America's domestic problems. Instead, they will only cause more harm to the ordinary American people.” The spokesperson sidestepped questions about whether Trump’s threats could endanger the U.S.-China phase one trade deal. “U.S. certainly does maintain a policy option, under various conditions, of a complete decoupling from China,” tweeted Trump Thursday. U.S. Trade Representative Robert Lighthizer told Congress a day earlier that decoupling wasn’t a “reasonable” trade policy.

The Commerce Department amended Export Administration regulations effective Thursday to allow U.S. companies to more easily participate in standards setting bodies in which Huawei is a member, says that day's Federal Register. Commerce, which recently announced the change (see 2006150062), seeks comments on the revision by Aug. 17.

Brazil added 12 items to its list of IT and telecom goods subject to duty-free treatment, the Hong Kong Trade Development Council reported. Duty-free treatment is through 2021, the group said Tuesday. Brazil's Washington embassy didn't comment Thursday.

U.S.-China technology competition and Trump administration restrictions on Huawei likely dashed prospects of a phase two trade deal, China experts said. Robert Dohner, of Atlantic Council and former Treasury Department official, called the deal “dead,” adding the U.S. approach to protecting technology damaged future negotiations. “I think the technology policies, particularly the pursuit of Huawei, have made it impossible now to go back and negotiate with China on technology policy or domestic industrial policy,” Dohner told a council webinar Tuesday. Leland Miller, a Chinese economy expert with the Atlantic Council, said the administration needs to reassess how it wants to approach Huawei and needs to better follow through on threats. Companies are trying to determine what they can “get away with,” said Dexter Roberts, also of the council. “All the restrictions in the world are going to be very, very hard to implement as long as Huawei is providing fast, cheap chips and cheap telecom gear that countries around the world want.” The White House declined to comment Thursday. The office of U.S. Trade Representative didn't comment.

Element Electronics landed exclusions Tuesday from the List 4A Section 301 tariffs on two classifications of LCD components it sources from China to assemble finished TVs in South Carolina for sale through Walmart and other big-box retailers (see 1906060001). The exemptions, for which Element applied in November, were for LCD main board assemblies, imported under the 8529.90.13.00 subheading, and panel assembly modules, sourced under the 9013.80.90.00 classification. Element’s filing for an 8529.90.13.00 exemption was the only request in that classification, the Office of the U.S. Trade Representative public docket shows. Its request for a 9013.80.90.00 exclusion was one of 12 in that category. The exclusions are retroactive to Sept. 1 when the List 4A tariffs took effect and will remain active through Sept. 1. In seeking the exclusions, Element told USTR it was unable to source the components from anywhere but China. Element didn't comment Tuesday.

The Office of the U.S. Trade Representative is starting Trade Act Section 301 investigations into digital services taxes (DSTs) that were adopted or are under consideration, the agency said Tuesday. Investigations focus on Austria, Brazil, the Czech Republic, EU, India, Indonesia, Italy, Spain, Turkey and the U.K. Comments are due July 15. Evidence "suggests the DSTs are expected to target large, U.S.-based tech companies," USTR said. "The European Commission is considering a DST as part of the financing package for its proposed COVID-19 recovery plan." The EU's delegation to the U.S. didn't comment. The "investigation initially will focus on the following concerns with DSTs: discrimination against U.S. companies; retroactivity; and possibly unreasonable tax policy," the USTR said. While the Information Technology Industry Council "hoped to avoid further escalation of tensions, increasingly-expansive unilateral tax measures have necessitated a stronger response,” said CEO Jason Oxman. “ITI continues to support the U.S. government’s efforts to investigate these complex trade issues." Tariffs are a possible result of Section 301 investigations. The agency previously started a Section 301 investigation into France over such taxes and tariffs that were proposed but not implemented (see 1912030002). “An increasing number of countries have proposed or enacted discriminatory and unilateral digital taxes in recent months, despite ongoing [OECD] negotiation," noted Internet Association Director-Trade Policy Jordan Haas. "The U.S. must continue sending a strong message to trading partners that targeted discriminatory taxes against U.S. firms are not an appropriate solution." Instead of "unilateral DSTs, the world needs a multilateral solution," said U.S. Chamber of Commerce Head-International Affairs Myron Brilliant. "The Chamber supports efforts to address these challenges through multilateral negotiations under the aegis of the OECD. We urge all parties to double down on those negotiations.”

Taiwan Semiconductor Manufacturing Co. hired outside counsel to “conduct legal analysis and ensure a comprehensive examination and interpretation” of new U.S. restrictions on Huawei (see 2005190030), a TSMC spokesperson emailed us Tuesday, declining to answer some of our questions about the companies' relationship. TSMC reportedly halted processing of all new orders by Huawei. Hours before the Commerce Department further stepped up controls on Huawei, TSMC announced plans to build its first U.S.-based chip factory. Minority Leader Chuck Schumer of New York and two other senior Senate Democrats pressed Secretary of Commerce Wilbur Ross and Defense Secretary Mark Esper Wednesday to tell them about U.S. government involvement in TSMC’s decision to build the U.S. chip factory, including if any “federal subsidies” were part of the negotiations. “We have serious questions as to how this project takes into consideration national security requirements and how it aligns with a broader strategy for building a diverse U.S. semiconductor manufacturing supply chain,” the Democratic senators wrote Esper and Ross. “We ask that you cease any such negotiations or discussions until you have briefed the relevant authorization and appropriations committees with your plans, including any commitments you have made to funding, tax breaks, licensures, or other incentives.” A “one-off investment like the proposed TSMC facility is inadequate to rebuilding U.S. manufacturing capacity in microelectronics, which is essential to our national and economic security,” the senators said. “Unfortunately, there is no evidence that the Administration has a comprehensive, integrated plan for achieving this.”

China promised countermeasures to respond to increased U.S. restrictions against Huawei, slamming “abuse of export controls” and violation of international trade laws. License requirements on shipments to Huawei for foreign-made chips containing U.S. content (see 2005180018) are a “serious threat” to China’s chip industry, China’s Commerce Ministry said Sunday, per an unofficial translation. State media said China is considering placing U.S. companies on its unreliable entity list. The rule will “complicate” operations for communication equipment manufacturers and could lead to drops in revenue and R&D efforts, emailed a U.S.-China Business Council spokesperson. “More transactions will require export licenses, adding additional expense and delays with no guarantee that licenses will be granted.” Chinese companies “of course would very much like to ... indigenize all aspects of the supply chain,” said Keith Krach, State Department undersecretary-economic growth, to reporters last week. “But at least for the moment … U.S. companies still have a very significant comparative advantage when it comes to the largely software-facilitated design tools that are involved in producing the very best chips.” National Foreign Trade Council Vice President Richard Sawaya said the rule falls short of industry’s worst fears, and members “realize that national security-related technology controls are warranted.” He said industry would have appreciated more transparency as the rules were being considered and a comment period. “That’s really what industry is asking for,” Sawaya told us: “Due process.” Monday, Huawei criticized the increased restrictions, saying they “ignore the concerns of many companies and industry associations.” It said the rule will “undermine” the global semiconductor industry. “The U.S. is leveraging its own technological strengths to crush companies outside its own borders,” the company said. Huawei’s rotating chairman, Guo Ping, said he's “confident” the company will work around the curbs. “Our experience over the past year has made us confident that we can find a solution, that our customers and suppliers can continue to stand with us and minimize the impact of this discriminatory rule,” he said. Sen. Ben Sasse, R-Neb., called the rule “long overdue.” The U.S. “needs to strangle Huawei,” Sasse said. “Modern wars are fought with semiconductors, and we were letting Huawei use our American designs.”