Tariff Truce: The Calm Before the Storm?
During the first in-person encounter since the trade war erupted, Presidents Donald Trump and Xi Jinping reached a consensus over the heated topic of tariffs. For the next 90 days, Trump has agreed to keep the current U.S. tariffs on Chinese goods as-is, providing certainty that his January 1 planned increase is temporarily put on hold. This agreement is not without risk, however. The same agreement also states that “If at the end of the period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent,” (BBC).
Nelson Dong, member of the Board of Directors of the National Committee on US-China Relations comments:
“Critically, the weekend agreement is only a temporary cease-fire in the trade war. It begins a 90-day window for the United States and China to reach a much broader agreement on trade- and investment-related issues that had sparked the punitive tariffs and counter-tariffs during 2018. These new negotiations will presumably focus on China’s perceived injurious policies, such as forced technology transfers from the United States to China, lax intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, and Chinese market access for U.S. services and agriculture. ”
“The United States will also likely press again for changes in China’s “Made in China 2025” national industrial policy that is seen as encouraging the misappropriation of U.S. and other foreign intellectual policy, among other unfair trade practices. China’s willingness to agree to any meaningful concessions concerning these broad economic issues remains far from certain, based on the several rounds of unsuccessful talks between U.S. and Chinese officials during much of 2018,” he adds.
With December quickly coming and going, may speculate if the temporary trade deal with create opportunity for compromise or simply delay an inevitable increase in trade tensions between the United States and China.
“During this interlude in the trade war, it is uncertain whether the U.S. Trade Representative (USTR) will offer much satisfaction to tens of thousands of U.S. companies who have filed exclusion requests with the USTR to be spared from the 25% tariffs already in effect from Lists 1 and 2. To date, no relief has been granted under that process. It is also unclear whether USTR will afford relief to those who have been asking for a similar exclusion process to be offered for the US$ 200 billion subject to the List 3 tariffs. As of now, there is no mechanism at all for U.S. companies to seek any relief from the List 3 tariffs, which will remain at 10% for now and which might still yet be hiked to 25% in 2019 if the planned talks fail again,” said Dong.
A Letter To The Presidents