Trade Update (February 25)
|US-China Trade Relations
Trade negotiators met in Washington, DC this week (Feb 19-22) for a fourth round of trade talks. According to sources familiar with the talks, negotiators are drafting “six memorandums of understanding (MoU) on structural issues: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture, and non-tariff barriers to trade.”
In an interview with Fox Business, Secretary of State Mike Pompeo said substantial progress has been made in the negotiations. He cited the commitments China has made on cyber theft and noted that the “heart of [the] discussions will surround enforcement mechanisms.”
On March 1, US tariffs on $200 billion worth of Chinese goods will increase from 10% to 25%. When asked about the approaching deadline, President Trump told reporters, “I think they’re trying to move fast so that doesn’t happen.” President Trump is expected to meet with Chinese Vice Premier Liu He on Friday afternoon (Feb 22), which many think shows signs of sufficient progress in the trade talks. This would be the second meeting between the two leaders. They previously met last month in Washington. With these promising events, it is possible President Trump and President Xi Jinping could meet in mid- to late March to iron out a final agreement. Senate Finance Committee Chairman Chuck Grassley (R-IA) worries that if a deal is struck too quickly it will “come up short” in terms of addressing China’s problematic trade practices.
US Trade Representative Robert Lighthizer will testify at the Ways and Means Committee hearing entitled, “US-China Trade.” The hearing will take place on Wednesday, February 27 at 10:00am. USTR Lighthizer is the only witness scheduled to testify.
Section 232 Auto & Auto Parts Investigation
The Department of Commerce submitted the results of its investigation into “the effect of imports of automobiles and automobile parts on the national security of the United States” to President Trump on Sunday (Feb 17). President Trump now has 90 days to determine if he will impose duties on autos and auto imports from foreign countries.
The investigation was initiated on May 23, 2018 to determine if imports of SUVs, vans and light trucks, and automotive parts impaired national security. When the investigation was announced, Commerce Secretary Wilbur Ross said, “There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry.” If Commerce finds the imports harm US national security a tariff of 25% could be levied on imported vehicles.
The conclusion of the Commerce investigation has reignited issues in the US-European Union trade negotiations. Over the summer, President Trump and European Commission President Jean Claude Juncker agreed to a variety of trade provisions while negotiations are ongoing. Those provisions included the EU purchasing more US liquefied natural gas (LNG) and soybeans and President Trump agreeing to not impose auto tariffs on European vehicles. On Monday (Feb 18), Juncker said, “Donald Trump gave me his word that there won’t be any car tariffs for the time being. I believe him. Should he renege on that commitment, we will no longer feel bound by our commitments to buy more U.S. soy and liquid gas. I would very much regret that.”
The Center for Automotive Research (CAR) released a report this week entitled, “US Consumer and Economic Impacts of US Automotive Trade Policies.” The report posits that if “(1) the US-Mexico-Canada Agreement (USMCA) is implemented in its current form, (2) other tariffs continue unmodified, and (3) the Section 232 auto and auto parts tariffs are imposed except on Canada, Mexico, and South Korea” that over 360,000 US jobs will be lost and the price of light duty vehicles will increase by $2,750. Even if only one of those scenarios occurs, CAR expects new vehicle dealership revenue and employment will still fall, which will result in “profoundly negative” consequences for consumers.
 Jeff Mason. “Exclusive: U.S., China sketch outlines of deal to end trade war — sources.” Reuters. 20 Feb 2019. https://www.reuters.com/article/us-usa-trade-china-deal-exclusive/exclusive-u-s-china-sketch-outlines-of-deal-to-end-trade-war-sources-idUSKCN1QA07U
 “Interview with Maria Bartiromo of Mornings with Maria on Fox Business Network.” US Department of State: New York City. 21 Feb 2019. https://www.state.gov/secretary/remarks/2019/02/289569.htm
 Mason. Reuters. 20 Feb 2019.
 Jenny Leonard & Jennifer Jacobs. “Trump to Meet with China’s Trade Chief Friday.” Bloomberg. 22 Feb 2019. https://www.bloomberg.com/news/articles/2019-02-21/trump-is-said-to-plan-meeting-with-china-s-trade-chief-on-friday
 “US-China Trade.” House Ways & Means Committee. 2019. https://waysandmeans.house.gov/legislation/hearings/us-china-trade
 “Statement from the Department of Commerce on Submission of Automobiles and Automobile Parts Section 232 Report to the President.” Commerce.gov, 17 Feb 2019. https://www.commerce.gov/news/press-releases/2019/02/statement-department-commerce-submission-automobiles-and-automobile.
 “US Department of Commerce Initiates Section 232 Investigation into Auto Imports.” Commerce.gov. 23 May 2018. https://www.commerce.gov/news/press-releases/2018/05/us-department-commerce-initiates-section-232-investigation-auto-imports
 Andrew Mayeda. “US-EU Trade Talks Progress with Trump eyeing Congress Approval.” Bloomberg. 20 Sept 2018. https://www.bloomberg.com/news/articles/2018-09-10/u-s-eu-trade-talks-progress-with-trump-eyeing-congress-approval
 Hans Von Der Burchard. “Juncker: Trump ‘gave me his word’ not to impose car tariffs.” Politico.EU. 19 Feb 2019. https://www.politico.eu/article/juncker-trump-gave-me-his-word-not-to-impose-car-tariffs/
 Michael Schultz, et al. “US Consumer & Economic Impacts of US Automotive Trade Policies.” Center for Automotive Research: Ann Arbor, MI. 2019. https://www.cargroup.org/wp-content/uploads/2019/02/US-Consumer-Economic-Impacts-of-US-Automotive-Trade-Policies-.pdf