Trade talks back on as $700 billion in goods on the line

Business and industry are on edge as U.S. officials land in Beijing this week for another round of trade talks. In two weeks, a 90-day moratorium on all new tariffs between the two countries is set to expire.

If trade representatives cannot broker a deal, President Donald Trump has promised to raise tariffs from 10 to 25 percent on $200 billion in Chinese goods on March 2. China will likely retaliate.

That would spell gloom for industry sectors across Arizona and the nation. Two rounds of earlier tariffs on more than $440 billion of goods between both countries are taking a toll.

Along with rising costs, America is rapidly losing its future market share, said Jeffrey Kucik, an assistant professor and expert on global market volatility at the School of Government and Public Policy at the University of Arizona.

“All of America’s trading partners are forming new trade agreements with other countries,” Kucik said. “They are carrying on with the status quo and none of those agreements involve the U.S. Other countries are moving on and looking for more reliable trade partners.”

This week, Caterpillar blamed the trade war for the company’s lowest point in sales in a decade. Chip makers’ industrial stocks took a downturn also traced to trade conflicts.

The U.S. Chamber of Commerce is calling on Congress to take action to stop these harmful tariffs that are, “simply put, a tax on businesses and consumers.”   

For now, there is mere hope that negotiators will extend the moratorium as the U.S. attempts to force China to end its espionage of U.S. intellectual property.

“If pressed, I would say there’s going to be some concessions exchanged and Trump is going to claim victory regardless,” Kucik said. “The question is whether these discussions are going to encourage Trump to double down and push harder, and that’s the real danger.”

In heading into this newest round of negotiations, Trump told the national press, “I think we’re going to be able to do a deal.”

Statements from his top trade negotiator, Robert Lighthizer, take a harder line. Lighthizer told the New York Times that the two sides have not even agreed on a draft framework. There also has been no discussion of rolling back American tariffs on Chinese goods.

“While progress has been made, much work remains to be done,” says a letter issued by the U.S. Press Office Jan. 31. “President Donald J. Trump has reiterated that the 90-day process agreed to in Buenos Aires represents a hard deadline, and that United States tariffs will increase unless the United States and China reach a satisfactory outcome by March 1, 2019.”

Concessions listed in the letter are:

• Ways in which U.S. companies are pressured to transfer technology to Chinese companies
• Stronger protection and enforcement of intellectual property rights in China
• Tariff and non-tariff barriers faced by U.S. companies
• China’s cyber-theft of U.S. commercial property
• Market-distorting forces like subsidies and state-owned enterprises that lead to excess capacity
• Market barriers and tariffs that limit U.S. sales of manufactured goods, services and agriculture to China

So far, after months of trade wars, few concessions have surfaced beyond China’s promise to buy more U.S. soybeans.

Growing economic and political pressures on both sides, however, could lead to some traction. There is talk of Trump and Xi having a sit down in mid-March, possibly at Mar-a-lago, Trump’s Florida resort.

China’s economy is slowing, which may press Xi to deal more than promises. In the U.S., companies like the “Big 3” automakers – GM, Ford and Chrysler – are loudly calling on Trump to lift tariffs on China and other countries.

Tariffs not only are harming businesses under the guise of national security, but they are undermining U.S. efforts to build an international coalition of like-minded countries to combat the use of unfair trade practices, Neil L. Bradley, the chamber’s chief policy officer, said in a letter to Congress Feb. 6.

The Chamber wants Congress to pass the “Trade Security Act” to “help restore the proper constitutional role of Congress in tariff policy by providing for Congressional disapproval of prospective tariffs.”

“This legislation would allow Congress to respond to the administration’s threat to impose a 25 percent tariff on all imported automobiles and auto parts and avert the enormous harm to the U.S. economy such action would inflict,” Bradley states. “The U.S. auto industry – the nation’s largest manufacturing sector – and many downstream industries would be inflicted with soaring costs and sweeping retaliatory tariffs, as would sectors such as agriculture and chemical manufacturing.

“All told, $700 billion of imports and exports could potentially be affected by this action, which is reportedly under serious consideration.”