On The Hill

Trade Update (July 13)

Jul 13, 2020 | SHARE  
US Announces Tariffs on France
 
On Friday (Jul. 10), the Trump administration announced 25 percent tariffs on a series of French goods worth about $1.3 billion. The move is in retaliation for a French digital services tax that would largely impact American technology companies.[1] 
 
The Office of the U.S. Trade Representative (USTR) said it would delay implementation of the levies for up to 180 days because France has not yet started collecting its digital services tax.
 
The administration is also allowing more time for discussions on a global deal at the Organization for Economic Cooperation and Development (OECD). 
 
Item’s targeted by the new tariffs include French cosmetics, soaps, and handbags. Notably absent from the list are French wines, cheeses, and cookware. 
 
To view USTR’s Notice of Action, click here.
 
On Friday (Jul. 10), the European Union (EU) urged the U.S. to return to negotiations at the OECD, but said it was ready to make a new proposal at the EU if talks failed.
 
The European Commission will put forward a proposal for a digital tax at the beginning of 2021, with a goal to introduce it by Jan. 1, 2023.[2]
 
 
Biden Releases Economic Plan
 
On Tuesday (Jul. 7), former Vice President Joe Biden laid out his plan to “rebuild the U.S. economy.” The plan includes cracking down on outsourcing, investing billions into research and development, and creating five million jobs in manufacturing and innovation.[3]
 
Biden’s plan calls for the federal government to spend $400 billion over four years on materials and services made in the U.S., as well as $300 billion on U.S.-based research and development involving electric cars, artificial intelligence, and similar technologies.
 
Additionally, his plan places an emphasis on “Buy American” provisions. These would tighten restrictions on what qualifies as a U.S.-made good. Biden is also advocating for a 100-day “supply chain review” that could require federal agencies to buy medical supplies and other goods made in the U.S.
 
“When we spend taxpayers’ money — when the federal government spends taxpayers’ money — we should use it to buy American products and support American jobs,” Biden said in a speech.
 
Biden called for a pro-worker trade strategy in which the U.S. would work with its global allies and within the World Trade Organization to get “tough on China.”
 
“Joe Biden’s going to fight like hell for American workers through trade, enforcing deals and rallying the world to take on China’s abuses,” a senior Biden campaign official told reporters.[4]
 
When asked about whether Biden would reverse any of President Trump’s major trade policy moves, a campaign official declined to comment and said the former vice president would have to review each of those issues in office.
 
The move comes as part of Biden’s four-part “Build Back Better” economic plan.
 
To view Biden’s plan to rebuild U.S. supply chains, click here.
 
To view Biden’s “Buy American” plan, click here.
 
 
US-China
 
On Friday (Jul. 10), President Trump downplayed the chances of a new China trade deal, and told reporters that the U.S. relationship with China has been “severely damaged.” Trump added he has “other things in mind,” rather than a second trade agreement (Phase Two), with China.
 
“They could have stopped the plague, they could have stopped it, they didn’t stop it,” he said, referring to the COVID-19 pandemic.[5]
 
On Monday (Jul. 6), a coalition of key business groups told the Trump administration the U.S. and China should focus on the implementation of their Phase One deal.
 
“Given the progress to date and the significant commitments in the agreement that would benefit the U.S. and Chinese economies as the global economy recovers from COVID-19 disruptions, U.S. industry fully supports the continuation and full implementation of the Phase One Agreement,” the groups wrote in a letter to USTR Robert Lighthizer, Treasury Secretary Steven Mnuchin, and Chinese Vice Premier Liu He.
 
The document was signed by 40 business groups and trade associations from a variety of sectors.[6]
 
“Meeting the global public health challenges from COVID-19 and restoring growth to the global economy will depend in part on both countries working together to fully implement the mutually beneficial outcomes of the Phase One Agreement,” the letter adds.
 
To view the letter, click here.
 
Separately, Rep. Rick Larsen (D-WA) said the Phase One deal did not move the U.S.-China trade relationship forward. “It was basically trying to get us back to zero as opposed to moving us forward,” he said during a webinar.
 
Additionally, Larsen said he did not expect China to meet its purchasing agreements under the deal, and the Trump administration’s approach on China has not worked. Phase One “hasn’t done anything to address (China’s) structural issues,” Larsen said.[7]
 
 
232
 
Business groups and other countries are pushing the U.S. to proceed “with caution” in its Section 232 investigation into imports of key electrical transformer components. The groups said trade restrictions would be costly and counterproductive.
 
The U.S. Chamber of Commerce said the U.S. is incapable of supplying grain-oriented electrical steel to meet the needs of the entire domestic manufacturing base and that access to imports of electrical transformer components supports an efficient and affordable operation.
 
“This remains the case despite the application of Section 232 tariffs broadly on imports of steel as well as the extensive application of import duties (often at rates above 100%) in connection with more than 150 antidumping (AD) and countervailing duty (CVD) orders in place on steel imports from dozens of countries, including on GOES,” the Chamber stated.[8]
 
To view comments on the Section 232 transformer investigation by the U.S. Chamber of Commerce, click here.
 
To view comments by the American Iron and Steel Institute, click here.
 
 
Steel & Aluminum
 
Canada’s chief USMCA negotiator Steve Verheul argued on Thursday (Jul. 9) that U.S. tariffs on Canadian aluminum would give producers in Russia and China “an edge” in the American market.
 
Verheul rejected claims of an aluminum surge, and said, “Russia and China would gain a greater market share into the U.S. on aluminum at the expense of Canadian exports.”[9]
 
“We have a hard time understanding how that relates to national security considerations given the kinds of exports we have been providing on a consistent basis,” he added. 
 
Last month, USTR Robert Lighthizer told the Senate Finance Committee the administration was looking at reimposing duties on the metal due to recent surges of imported steel and aluminum.
 
On Monday (Jul. 6), the American Primary Aluminum Association (APAA) asked President Trump to reinstate the 10 percent tariff on Canadian imports. The association said this would help enforce trade agreements, stop the “unprecedented Canadian import surge,” and protect American workers.
 
To view APAA’s letter, click here.
 
 
References
 
[1] Tankersley, Jim. “U.S. Will Impose Tariffs on French Goods in Response to Tech Tax.” New York Times 10 Jul. 2020. https://link.edgepilot.com/s/b53a52b3/iK35ZdF1Hk2so2EKdaSv4Q?u=https://www.nytimes.com/2020/07/10/business/us-will-impose-tariffs-on-french-goods-in-response-to-tech-tax.html
 
[2] Heikkila, Melissa & Braun, Elisa. “EU looks to introduce digital tax by 2023.” Politico Pro, 10 Jul. 2020. https://link.edgepilot.com/s/3a35c59e/2dlaxbsEzECSuqFaMujnsQ?u=https://subscriber.politicopro.com/article/2020/07/eu-looks-to-introduce-digital-tax-by-2023-3982395
 
 
[4] Stein, Jeff & Sullivan, Sean. “Biden releases U.S. – centered economic plan, challenging Trump’s ‘America First’ Agenda.” The Washington Post, 9 Jul. 2020. https://link.edgepilot.com/s/c378cd38/Zt4u_ULeWkecQGXiQmuO9g?u=https://www.washingtonpost.com/politics/biden-releases-700-billion-plan-to-spur-american-economy/2020/07/09/f51b846c-c173-11ea-b178-bb7b05b94af1_story.html
 
 
[6] “Major business groups urge administration to prioritize U.S.-China deal.” Inside U.S. Trade, 6 Jul. 2020. https://link.edgepilot.com/s/a3cab023/OF2n8FqwnkazgDv_Y2YaXg?u=https://insidetrade.com/daily-news/major-business-groups-urge-administration-prioritize-us-china-deal
 
 
[8] “Business groups, countries warn against tariffs on transformer components.” Inside U.S. Trade, 9 Jul. 2020. https://link.edgepilot.com/s/975a5e8f/30LFPIgF20S8Z2_jufGe1w?u=https://insidetrade.com/daily-news/business-groups-countries-warn-against-tariffs-transformer-components
 
[9] Blatchford, Andy. “Canada’s top trade official: Fresh aluminum tariffs would give boost to Russia, China.” Politico Pro, 9 Jul. 2020. https://link.edgepilot.com/s/07835c3d/ii69Jh51NEq1G-cazdTnCA?u=https://subscriber.politicopro.com/article/2020/07/canadas-top-trade-official-fresh-us-aluminum-tariffs-would-give-boost-to-russia-china-1964218
 
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