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. Can you update us on recent developments on the trade front?

A. There have been several new developments relating to United States trade actions discussed in past Weise Wednesdays.

 

Section 301 tariffs on China

First of all, the trade tensions between the U.S. and China over the punitive tariffs imposed by the U.S. continue to mount. As previously discussed, the U.S. imposed an additional 25% tariff on $34 billion worth of Chinese imports on July 7 and was in the process of extending the tariff to an additional $16 billion of Chinese products. China retaliated immediately by imposing a 25% tariff on $34 billion of U.S. goods and threatened to match the U.S. if it implemented the tariffs on the additional $16 billion of Chinese goods.

In July, President Trump responded to the Chinese actions by directing the U.S. Trade Representative (USTR) to develop a new list of Chinese imported products worth $200 billion that would be subject to an additional 10% tariff. USTR was going through the public comment process on that list of products, when late last week, the President directed USTR to consider raising the proposed 10% additional tariff to 25%. A public hearing on the proposed tariff increases will be held in Washington on August 20-23. 

China immediately responded by threatening to impose increased tariffs on $60 billion of U.S. imports if the U.S. follows through and implements the new wave of tariff increases.

These actions have created a great deal of stress on global traders and the bilateral trade relationship between the two parties. The U.S. continues to hope that a bilateral trade deal can be reached between the parties to address the fundamental intellectual property rights complaints made by the U.S. in the Section 301 investigation and reduce the significant trade surplus in goods that China has with the U.S. Meanwhile, the trade war continues.

 

Section 232 action on steel and aluminum

In past Weise Wednesdays, I have discussed the U.S. initiative imposing a 25% additional tariff on designated steel products and 10% additional tariff on designated aluminum products. I have also laid out the retaliatory tariffs that have been imposed by a number of countries, including the European Union (EU), Canada and Mexico, adversely impacted by those tariffs. Several countries have also launched formal complaints against the U.S. action at the World Trade Organization (WTO). 

With the exception of the trade arrangement between the EU and the U.S. discussed below, not much has changed on this front in recent weeks, and global traders have been forced to deal with the increasing costs of additional tariffs. Negotiations continue to take place between the U.S. and its impacted trading partners to reach bilateral agreements to resolve the underlying issues and remove the additional tariffs. Hopefully, those negotiations will be successful. Meanwhile, trade tensions remain high between the U.S. and its trading partners.

 

The EU-U.S. trade “deal”

On a positive note, after hours of discussion on July 25, President Trump and EU Commission President Jean-Claude Juncker announced in a joint press conference that they had struck a trade “deal.“ Both sides agreed to “work together toward zero tariffs, zero non-tariff trade barriers, and zero subsidies on non-auto industrial goods.” 

The EU pledged to increase its purchases of U.S. soy beans and natural gas. The parties also agreed to work together to reform the WTO and address unfair trading practices. Negotiations to address these and other issues are expected to begin immediately, and both parties pledged to refrain from imposing new tariffs and reassessing existing tariffs on steel and aluminum while the negotiations continue. 

This is a very positive development in the bilateral relationship between the two parties and seems to have tremendous potential benefit to global traders if the negotiations are successful. We will all need to stay tuned for further developments as the negotiations proceed.

 

Section 232 action on automobiles

As reported in an earlier Weise Wednesday, President Trump initiated a new investigation on May 23 to determine if automobile imports are threatening the national security of the U.S. The investigation is still ongoing. An affirmative finding could result in additional duties and/or quotas on imported automobiles and parts. 

As the investigation proceeds, several of our trading partners are gearing up to prepare for the potential consequences of the U.S. imposing new tariffs on imported automobiles and auto parts. Last week trade officials from Canada, Mexico, Japan, South Korea, and the EU met in Geneva to strategize on a coordinated response to such an action by the U.S. The parties are expected to continue their discussion in the coming weeks and months. Again, stay tuned for further developments.

 

Conclusion

These continue to be challenging and uncertain times for global traders. Global traders need to stay actively engaged in monitoring new developments like these and continue to make their views known to government decision makers.