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Trade Update (August 26)

Aug 26, 2019 | SHARE  

China Announces $75 Billion Tariffs on US Products, Trump Responds

On Friday (Aug 23), China announced it will move forward with as much as 10 percent on $75 billion worth of US products as retaliation to President Trump’s threats to impose new duties on Chinese imports in September. According to the State Council’s Customs Tariff Commission, the extra tariffs will apply to goods including soybeans, beef, pork and crude oil. White House trade adviser Peter Navarro said China’s reaction was “well anticipated” but would only “strengthen the resolve of this president.” “And they signal once again to the American public that China wants to buckle our knee so that they can keep having their way with us,” Navarro, a driving force behind the administration’s tough line on Beijing, said on CNN. The commission also said that 25 percent tariffs on American vehicles and car parts would take effect from Dec. 15, up from the 5 percent duties now in place for the products.[1] The commission said China decided to reimpose tariffs because Washington’s planned increases “violate the consensus reached by the two heads of state in Argentina and the consensus reached in Osaka,” referring to meetings between Trump and Chinese President Xi Jinping in December and June. Just hours later, President Trump responded with a series of heated tweets that ordered companies in the US to stop doing business with China. He also warned of further retaliation on the US’ part. “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing our companies HOME and making your products in the USA,” Trump said. The rest of the tweets can be found here. The S&P 500 dropped more than 2 percent, and the Dow Jones industrial average and Nasdaq index experienced similar declines.


G-7 Summit

Leaders of the G-7 countries will convene in Paris this weekend. President Trump will likely take center stage at the summit where he reportedly plans to pressure the host nation to repeal the “digital tax” on US tech companies and will also demand India lower tariffs, according to senior administration officials. Further, he called for a special session on Sunday to address the global economy. Trump has one-on-one meetings scheduled with leaders of the United Kingdom (UK), France, Japan, India, Germany, and Canada. When Trump meets with French President Emmanuel Macron, he will bring up his opposition to France’s new digital services tax, a measure the US views as targeting major US tech companies like Google and Facebook, the officials said. Trump has threatened to hit back by imposing tariffs on French imports, including wine, and the Office of the US Trade Representative (USTR) has begun an investigation of the tax that could provide a legal basis for US retaliation.[2] The summit will also serve as Trump’s first face-to-face with new British Prime Minister Boris Johnson, with the pair likely discussing Britain’s impending exit, or “Brexit,” from the European Union (EU). A mini trade deal with Japan is also likely to be on Trump’s mind when he meets with Prime Minister Shinzo Abe while in France. USTR Robert Lighthizer met this week, and for the second time this month, with Japan‘s minister of economic revitalization, Toshimitsu Motegi. The two officials have stepped up efforts in recent weeks to try to reach a deal that will offer US farmers new market access in Japan. Tokyo, however, is demanding that the US get rid of tariffs on certain auto parts as the US side looks to craft an agreement that could bypass the need for congressional approval.[3] 


References

[1] Lee, Amanda. Churchill, Owen. “China announces fresh tariffs on $75B of US products.” Politico Pro. South China Morning Post. 23 Aug 2019. https://subscriber.politicopro.com/article/2019/08/china-announces-fresh-tariffs-on-75b-of-us-products-1678454

[2] Behsudi, Adam. “Trade to dominate Trump’s G-7 discussions.” Politico Pro. 22 Aug 2019. https://subscriber.politicopro.com/article/2019/08/trade-to-dominate-trumps-g-7-discussions-1677487

[3] Behsudi, Adam. “Trade to dominate Trump’s G-7 discussions.” Politico Pro. 22 Aug 2019. https://subscriber.politicopro.com/article/2019/08/trade-to-dominate-trumps-g-7-discussions-1677487

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