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New US tariffs on China a step closer

The trade war goes on. Tariff increases from 10 to 15 per cent on US$300 billion of Chinese imports, many of them consumer goods, to the United States moved a step closer on Tuesday as the US government scheduled an official filing confirming the move announced by US President Donald Trump last week.

The notice to increase tariffs – which will appear on Friday, August 30 in the US Federal Register, an official journal that hosts changes to federal government agency rules and public notices – followed up swiftly on Trump’s decree last Friday that tariffs already scheduled for implementation on September 1 and December 15 respectively would see their rate increase by 5 per cent.

This move was in response to China’s decision earlier on Friday to impose retaliatory tariffs of between 5 and 10 per cent on US$75 billion worth of American products, including soybeans, pork, and, for the first time, crude oil. China also reinstated the 25 per cent penalty duty on imports of US-made cars and car parts, bringing the total tariff on the sector to 40 per cent.

“In accordance with the specific direction of the president, the US Trade Representative has determined to modify the action being taken in this Section 301 investigation by increasing the rate of additional duty from 10 to 15 per cent for the products of China covered by the US$300 billion tariff action published on August 20, 2019,” read a draft note hosted on the US Federal Register.

Given that September 1, when the next round of tariff increases are due to take effect, is a Sunday, and Monday, September 2, is the Labour Day public holiday in the US, the US Trade Representative (USTR) notice needed to be made before the weekend.

USTR had published a notice on its own website on Friday saying that “to achieve the objectives of the China Section 301 investigation, president Trump has instructed the USTR to increase by 5 per cent the tariffs on around US$550 billion worth of Chinese imports.”This alluded to Trump’s announcement, also last Friday, to increase the tariff level on earlier rafts of Chinese goods worth US$250 billion from 25 per cent to 30 per cent. However there is no confirmation of this escalation in the USTR filing on Tuesday.

The two tranches of tariffs covered by the September and December increases include consumer goods not previously subject to tariffs, but Trump opted to hold back on the increase of levies on some products, such as smartphones, toys and laptops, to protect retail sales over the Christmas period.

Nonetheless, Trump’s escalation of US tariffs on Chinese goods has been roundly criticised by retail and consumer groups in America.

“It’s impossible for businesses to plan for the future in this type of environment. The administration’s approach clearly isn’t working, and the answer isn’t more taxes on American businesses and consumers. Where does this end?”, said David French, senior vice-president of the National Retail Foundation.

Meanwhile, Brian Dodge, the chief operating officer of the Retail Industry Leaders Association, said: “Mr President, we implore you to end this trade war before the damage is irreversible.”

Currently, the prospects of a deal to end the trade war appear bleak, despite Trump saying on Monday that he was confident that China was sincere about wanting a trade deal because it had taken “a very large hit” in recent months.

Trump alluded to high-level negotiating calls having taken place between both sides, but Chinese foreign ministry spokesman Geng Shuang said on Tuesday that he “had not heard about” any such calls.

“China and the US should resolve their trade disputes through dialogue. We have had 12 rounds of high-level consultations, and working teams from the two sides are keeping in touch,” Geng said. “Regretfully the US has announced its decision to add new tariffs on Chinese products. Such maximum pressure will hurt both sides and is not constructive at all.”

Despite both sides appearing to be poles apart on negotiations, the CEO of US aircraft manufacturer Boeing said in an interview with Reuters on Tuesday that he expects a deal to be reached, and that he thinks the company’s aircraft will be part of it.

“It’s been challenging,” said Dennis Muilenburg. “But I think ultimately they will find a solution because of the mutual interest, and we think our aeroplane business will be part of that ultimate solution.”

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