SEMA eNews Vol. 22, No. 19, May 9, 2019

President Trump Orders Tariff Hike as U.S./China Trade Negotiations Stumble

By SEMA Washington, D.C., Staff

President Trump announced that tariffs on $200 billion worth of Chinese products would increase from 10% to 25% on May 10, unless there was significant progress toward reaching a U.S./China trade accord. Although media reports have suggested that the negotiations were in the final stages, agreement does not seem to have been reached on ending forced technology transfers whereby U.S. companies are coerced into sharing technology trade secrets with their Chinese business partners.  

Last July, the U.S. began imposing 25% tariffs on $50 billion worth of Chinese imports, including miscellaneous metal and rubber parts for auto equipment, machinery, tools and measurement devices. Last September, 10% tariffs were imposed on $200 billion worth of imported Chinese products, including many auto parts, from engines and metal fasteners to tires, steering wheel components, rubber gaskets, transmission belts, brake pads, windshields and suspension springs. These tariffs were scheduled to increase to 25% on January 1, but the increase was postponed indefinitely while negotiations were deemed productive. They are now set to increase on May 10. President Trump also stated that he plans to impose 25% tariffs on the remaining $325 billion worth of Chinese products “shortly.” China has imposed retaliatory tariffs on $110 billion of U.S. exports.  

U.S. and Chinese officials are reportedly drafting six separate agreements covering agriculture, services, non-tariff barriers, currency, intellectual property rights and forced technology transfers, and cybersecurity. In recent weeks, U.S./Chinese negotiators have been discussing how to enforce an agreement, with the U.S. wanting to phase out the tariffs over a period of time as compliance with the agreements is demonstrated.

Unless postponed, the tariff hike from 10% to 25% will take place May 10, at 12:01 a.m. The United States Trade Representative (USTR) will create a process for requesting exclusion from the newly imposed 25% tariffs. If pursuing a request, a company must demonstrate that the product is available only from China, that the tariff will cause severe economic harm and that the good is strategically important. The 25% tariffs on the additional $325 billion worth of products will first be subject to public comment and hearings. 

While SEMA supports the Trump Administration’s goal to secure structural reforms in the U.S./China trade relationship, including the protection of intellectual property rights, SEMA has opposed the use of tariffs as a primary negotiating tool. Tariffs are a blunt instrument for dealing with trade disputes and are ultimately a tax on American companies and consumers. 

For more information, contact Stuart Gosswein at stuartg@sema.org.

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