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As Washington and Beijing struggle to break a trade stalemate, some government advisers press the president
Asset
to increase the stakes with a sharp increase in the proposed tariff level for $ 200 billion of Chinese imports targeted for punitive measures.
Trump administration advisers discuss measures that could bring Chinese negotiators to the table. Some push the president to apply tariffs of up to 25% on 200 billion dollars of Chinese imports, against an initial proposal of 10%.
The White House will not make a final decision until at least the end of August on these tariffs, which are likely to target consumer goods and food as well as machinery components. Advisers justify the higher tariffs, in part, to offset the rapid depreciation of the yuan in recent months. Since May 30, the yuan has fallen 6% against the dollar.
"Once you've used the tariffs to disrupt the Chinese, you'll have to say 25% versus 10%," said Derek Scissors An expert from the American Enterprise Institute advises the administration on trade
The United States has already imposed tariffs of 25% on Chinese imports of $ 34 billion and must pay $ 16 billion worth of goods. The next $ 200 billion would be the next step, if the US ended Mr. Trump's threat to increase the pressure and, if necessary, impose duties on the $ 505 billion of goods that China ships to the United States.
The tariff level debate comes as Washington has not yet made significant progress in resolving its commercial dispute with Beijing. treasury secretary
Steven Mnuchin
and Chinese envoy Liu He and their staffs continue to talk about a possible meeting, officials said in both capitals, but the talks remain at a very preliminary stage.
The two sides argue that it is up to the other to take the first step after several Chinese preliminary offers, mainly involving the purchase of more US products, were rejected by Mr. Trump as inadequate.
Both parties agreed that their initial offers were not a solid foundation for further negotiations, according to a senior member of the American business community following the discussions. These included the Chinese offer mainly to buy US goods, and the United States demanding that China basically give up industrial policy that made it an economic power, said the top executive. "They reject unnecessary ideas and rhetoric," he said. "They are determining what could be on the agenda and what could be a solution."
Mnuchin said at the Group of 20 meeting last week in Buenos Aires that he and members of the Chinese delegation were engaged in "gossiping."
Long-time Chinese hands call for a resumption of talks. begin. They include the former treasury secretary
Hank Paulson,
who was Mr. Mnuchin's boss at
Goldman Sachs Group
Inc.,
and Chief Executive Officer of Blackstone Group LP
Stephen Schwarzman,
says people familiar with the efforts.
The administration believes that it strengthened its hand last week with a tentative trade agreement with the European Union. Both parties agreed to use the World Trade Organization to deal with intellectual property theft, government pressure on businesses to transfer technology and the operation of public industries – all code words for the commercial crimes alleged by Beijing. , China is "in a very difficult position", Lawrence
Kudlow,
director of the National Economic Council, said Sunday on CBS. "China is, I think, isolated."
All that the United States could have done with Europe has not, however, facilitated the commercial struggle with Peking. The United States alleges that China presses US companies to deliver valuable technology to them and uses unfair trade practices to produce a huge trade surplus with the United States
The Trump administration remains deeply divided over the better way to deal with the two main factions are moving in different directions. Commercial Falcons of China, led by the US Trade Representative
Robert Lighthizer,
Commercial doves, led by MM. Mnuchin and Kudlow, have sought a solution short of massive tariffs, fearing that these levies, plus Chinese retaliatory tariffs on US products could slow down US growth and the financial markets of tanks. Mr. Mnuchin and Mr. Liu continued to discuss relations between China and the United States, but some of these conversations went wrong.
In an indication of the tension between the two countries,
Qualcomm
Inc.
last week had to scuttle its agreement to buy a Dutch company
NXP Semiconductors
NV after China did not give the deal the go ahead. A few days earlier, Mr. Mnuchin called on Mr. Liu to press for his approval, according to people familiar with the case. Mr. Mnuchin did not believe that the call had gone well, according to people.
The Chinese decision was a blow for Mr. Trump, who had worked to reduce US penalties on the Chinese telecom giant.
ZTE
Corp.
, accused of having violated the US sanctions against the. Iran and North Korea. Some US government and industry representatives were expecting ZTE's efforts to encourage China to reciprocate and approve the Qualcomm-NXP agreement.
Previous negotiations have led the Chinese side to be skeptical Mr Mnuchin can conclude a trade agreement. Mr. Liu had offered to buy close to US $ 70 billion worth of agricultural, energy and other products last month, which, according to Beijing, has largely responded to Trump's call to reduce the bilateral trade deficit. $ 200 billion. But Mr. Trump rejected this proposal. "Both parties continue to talk to each other," said one person familiar with the discussions.
The magnitude of the US tariff offensive put Beijing under severe strain. Chinese leaders face headwinds, including the weakening of investment and household consumption, as well as rising business failures. Trade tensions threaten to jeopardize growth.
Beijing is however prepared for a long fight. Tuesday, the President
Xi Jinping
oversaw a high-level meeting that signaled a shift in economic priorities towards supporting growth through means such as debt control. The meeting presented a series of pro-growth measures, such as greater infrastructure spending and easier credit for banks and businesses.
Chinese authorities have also weighed up where to support retaliation against US national interests. The measures implemented so far include the suspension of licenses for US companies, delaying approval of mergers and acquisitions involving US companies and intensifying inspections of US products at Chinese borders.
Beijing is also wary of pushing companies to leave the United States leaving China – which could be a blow to Beijing's efforts to attract foreign capital and keep its employees at a time of growing economic contraction [19659021]. In an apparent effort to allay fears that Beijing may increasingly target US companies. , a statement issued by Tuesday's Politburo meeting specifically said that "the legitimate rights of foreign companies in China will be protected."
Write to Bob Davis at [email protected] and Lingling Wei at lingling .wei @ wsj.com
Appeared in the print edition of August 1, 2018 under the title "Advisers urging to raise tariffs of China to 25%".
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