President Donald Trump said he will “probably“ speak to Chinese President Xi Jinping over the phone as top trade officials from the two countries prepare to meet later this evening for a new round of talks.
The negotiations hit a rough patch after U.S. officials accused China of reneging on a number of commitments it had made in the yearlong trade talks. In response, Trump says it will increase tariffs to 25 percent on roughly $200 billion worth of imports, from 10 percent. China has vowed to hit back with its own retaliation.
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Trump reiterated that the tariff increase would take effect at 12:01 a.m. Friday. He added that the administration is “starting the paperwork today” to impose a 25 percent duty on all remaining imports from China.
“Our alternative is an excellent one,” Trump said at the White House on Wednesday, in an apparent reference to the tariff increases. “It’s an alternative I’ve talked about for years.”
Trump said it was still possible for the two sides to reach a deal. He said he received a “beautiful” letter from Xi saying, “Let’s work together. Let’s see if we can get something done.”
Talks involving Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and other officials begin at 5 p.m.
Trump wants to speak with Xi tonight, said a source close to the talks. That leaves an opportunity to reach some level of accord before tariffs are increased.
“We have two great alternatives,” Trump said. “Our country is doing fantastically well.”
Trump decided to impose the higher duties after learning that China balked on a demand that it codify a wide-range of commitments it had made in the 150-page draft deal. The U.S. is pressing Beijing to amend its laws and regulations, including an end to the practice of forcing foreign companies to transfer technology and intellectual property to domestic partners.
“They renegotiated the deal,” Trump said. “They took — whether it‘s intellectual property theft — they took many, many parts of that deal and they renegotiated it. You can’t do that.”
Trump has the authority to immediately increase the 10 percent tariff rate on Chinese goods. U.S. Customs and Border Protection issued a notice Thursday afternoon announcing collection of the increased tariff rate. The increase would only apply to goods exported on Friday or later, which means shipments already in transit would not be hit with the higher duty.
Imposing new fees on all remaining products that the U.S. imports from China, as Trump has threatened, will require going through a monthslong rulemaking process. Normal procedures require a 60-day notice and comment period for the new tariff, which means the remainder of imports wouldn’t be penalized until after Xi and Trump have a chance to meet in public at a gathering of G-20 leaders in Japan in late June.
Investors have been jittery all week about the possibility of a full-blown trade war between the two economic powers, but seemed somewhat reassured by the president’s latest comments.
The Dow Jones Industrial Average, which was down nearly 450 points in morning trading, recovered on hopes that some deal could be worked out in the near future. By the 4 p.m. close, the Dow was down only about 139 points, or about 0.5 percent. The broader Standard & Poor’s index of 500 major stocks was down just slightly — off about 0.3 percent.
“We’re going to find out about China tonight and I think in the end you’re going to be very impressed with the kind of things we’re doing,” Trump said.
Trump also railed against the U.S. trade deficit with China and blamed past U.S. leaders “for allowing this to happen.”
He called the World Trade Organization the “worst trade deal ever made“ and criticized China’s 2001 entry into the Geneva-based organization.
China’s membership in the global trading group forced Beijing to cut its tariffs. China also had to follow international rules — but it also meant other countries had to offer Beijing similar market access concessions it gave to other nations. Lighthizer and other critics have argued that WTO rules have done little to contain unfair practices in China’s state-run economy, even as Beijing reaps the rewards from belonging to the group.
“China was flatlining for many, many decades,” Trump said. “The WTO came along, we allowed China into the WTO and they became a rocket ship.”
But critics of Trump’s strategy warn that the use of tariffs as leverage will hurt American consumers and businesses.
“There are real world consequences that cascade from the decision to use tariffs to force the Chinese to make concessions,” David French, senior vice president of government relations for the National Retail Federation, said in a call with reporters on Thursday. “ In order to get pressure on the Chinese, we actually have to impose real pain on millions of Americans along the way.“
If the U.S. does hit all remaining Chinese imports with duties, a broad range of consumer goods ranging from smart phones to apparel and footwear would be taxed.
Alex Camara, CEO of AudioControl, a Seattle-based manufacturer of audio equipment that imports about 30 percent of its components and parts from China, disputed Trump’s repeated assertion that China is paying the tariffs.
“Audio Control has to pay to the U.S. government tariffs or taxes as we see them to release that product“ from a port, he said during the call. “So it is the U.S. company that is paying them. I think there is a real miscomprehension about that.”