Welcome to Weise Wednesday! Twice a month we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Q. Could you bring us up-to-date on recent developments on Trump trade initiatives?

A. There have been major developments on the Trump trade initiatives that I discussed in my last blogpost. Most significantly, U.S. and China leaders reached a tentative agreement last week in Washington that seems to have averted a potential trade war between the two countries. There was also a noteworthy development from the European Union on the U.S. section 232 initiative to impose tariffs on a wide range of steel and aluminum imports. I will also touch briefly on the status of NAFTA negotiations.

 

Section 301 tariffs on China

China sent a high level delegation to the U.S. last week to resume negotiations to address trade conflicts between the two countries. On Monday, it was announced that a preliminary agreement was reached to address the large trade imbalance between the two countries and that the proposed U.S. tariff increase on Chinese products would be suspended indefinitely. 

Although many details of the agreement will need to be worked out in future discussions between the two sides, China apparently has promised to take steps to substantially reduce its trade deficit in goods with the Unites States. China has reportedly agreed to increase its purchases of U.S. products, especially agricultural and energy products. China has also agreed to significantly increase its purchases of U.S. services. 

It does not appear that any specific agreements were reached on the underlying intellectual property issues that formed the basis of the section 232 case initiated by the United States or other bilateral trade disputes that the U.S. has with China. Instead, a joint statement issued by the two parties indicated that the two sides agreed to strengthen cooperation on intellectual property protections and encourage two-way investment and create a fair, level playing field for competition. 

For the time being, the threat of a trade war between the two parties seems to have been averted. Negotiations between the two parties are expected to continue over the coming weeks to add details to the framework agreement. 

Secretary of Treasury Mnuchin, in a recent interview, acknowledged that the two countries still have much work to do to head off a trade war but that good progress has been made to this point. He also indicated that the suspended tariffs could be re-imposed if a satisfactory agreement is not reached. Stay tuned for further developments.

 

Section 232 steel and aluminum tariffs

The most noteworthy development on this initiative is that the European Union has officially notified the World Trade Organization (WTO) of its intention to retaliate against the United States if the EU does not receive a full exemption from the steel and aluminum tariffs.

The exemptions for steel and aluminum products from Canada, Mexico, and the EU are scheduled to expire on May 31, 2018, while bilateral discussions with each continue. The EU submitted two lists to the WTO. The first lists U. S. goods upon which the EU intends to impose an additional 25% tariff beginning June 20.

The second list enumerates U.S. goods that would be subject to additional duties of 10%, 25%, 30%, or 50%. These additional duties would become effective on the earlier date of March 23, 2021 or the date that the WTO determines that the U.S. tariffs are in violation of WTO rules. The tariffs on both lists would remain in effect as long as the U.S. tariffs against EU products remain in effect.

The U.S. is still hoping to reach a bilateral agreement with the EU before the end of the month to limit EU steel and aluminum exports to the U.S. But the EU continues to insist that, as a trusted trading partner of the U.S., it should have a permanent unconditional exemption from the additional tariffs.  Again, stay tuned for further developments as to how this dispute is resolved.

 

NAFTA

Talks between the three countries are continuing in an effort to reach an agreement as early as possible to avoid the complication of upcoming political elections. At this point, it seems clear that the parties are unlikely to reach an agreement by the end of this month as had been hoped. As a matter of fact, Secretary Mnuchin publicly stated this week that the negotiators are “still far apart” and predicted that the negotiations “could spill into next year.”