WASHINGTON — The tariff war between the United States and China escalated this past week, dashing hopes that an agreement that would begin to normalize trade relations between the world’s two largest economies was imminent.
President Donald Trump, charging that China was backtracking on commitments it already had made during the year-long negotiations, on May 10 raised to 25 percent from 10 percent the tariff increases authorized last year on $200 billion worth of Chinese goods. The 25 percent tariff increase now applies to a total of $250 billion in Chinese goods. Additionally, Trump said the United States was preparing to extend the 25 percent tariff hike to the remaining goods imported from China, which were valued at about $325 billion.
China immediately retaliated, extending its tariff hikes to another $60 billion worth of US products. The governments of both nations said they were willing to continue trade talks.
Trump said he planned to meet with Chinese President Xi Jinping at the G-20 summit, which was scheduled to take place in Osaka, Japan, June 28-29. Trump sets great store in his personal relationships with select foreign leaders, including President Xi, and some analysts suggested a meeting between the US and Chinese presidents may help put the trade talks back on track.
Meanwhile, farm and agribusiness groups voiced frustration at trade talks running aground yet again.
The Trump administration’s reliance on raising tariffs and its go-it-alone approach to addressing China’s trade practices also have been criticized by veteran international trade negotiators and analysts from across the political spectrum.
Derek M. Scissors, Ph.D., resident scholar, American Enterprise Institute, and chief economist, China Beige Book, Washington, asserted it was high time to confront China about its trade practices while suggesting there may be more effective means of securing change than reliance on tariffs.
Scissors said, “The ag community, and parts of the business community, don’t really care about China’s I.P. (intellectual property) theft and coercion. At the level of national interest, the United States has to care, and act. And Chinese retaliation starts with soybeans.
“Having said that, the Trump administration has put the cost of predatory Chinese I.P. behavior in the tens of billions or even hundreds of billions annually. And yet we aren’t retaliating against Chinese firms at all. If we had a process to punish companies benefiting from I.P. theft and coercion, there’d be a lot less pressure to use tariffs. The upshot: The United States is long overdue in confronting China, and there is no way for farmers to escape from that. But tariffs are an inferior tool to attacking the guilty Chinese parties.”
Joe Glauber, Ph.D., senior research fellow at the International Food Policy Research Institute, Washington, former chief economist of the US Dept. of Agriculture and the US agricultural envoy during the Doha Round of international trade negotiations, acknowledged there was a lot at stake in the US-China negotiations considering the “legitimate issues on how China conducts business.” At the same time, Glauber said he takes issue with the unilateral tactics employed by the Trump administration.
“I would much rather have seen a lot of the issues brought through a dispute settlement body at the World Trade Organization, where we have won a case on subsidies against China, and where we just recently won a case on tariff rate quota administration against China,” Glauber said. “There were two big cases to have won.”
He also pointed out unilateral measures, such as the United States imposing tariffs on aluminum and steel imports, including from traditional trade and strategic allies, stood in the way of coordinating efforts with other nations to confront China on its trade practices. In an effort to assuage the financial stress that farmers will have to endure as the tariff war continues, Trump said the government would use some of the revenue collected from the increased tariffs to fund a $15 billion financial relief package for farmers.
“We’re going to take the highest year, the biggest purchase that China has ever made with our farmers, which is about $15 billion, and do something reciprocal to our farmers so our farmers can do well,” the president tweeted.
In a separate tweet, the president said, “With the over $100 billion in tariffs that we take in, we will buy, in larger amounts than China ever did, and ship it to poor and starving countries in the form of humanitarian assistance.”
Secretary of Agriculture Sonny Perdue confirmed the president has directed him to put together a relief program.
Glauber said a new relief program would likely be similar to the Market Facilitation Program developed last year to provide direct payments to producers to compensate them for sales lost because of trade disputes, rather than depending on large-scale purchases of farm products for donation abroad.
“Sending out a lot more in humanitarian aid just doesn’t work very well,” Glauber said. “Humanitarian aid, when it’s sent to countries who have food emergencies, mainly comprises food grains” as opposed to oilseeds and grains used as feed. The USDA has a list of products it donates abroad, some of which are fortified with soy, “but it’s hard to think about doing any sort of thing on the humanitarian side that would have an effect on price, and if you somehow did, you really run the risk of being accused of subsidizing exports.”