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Roll Back of Tariffs Stymie Phase One Trade Talks with China

Josh Zumbrun, William Mauldin and Chao Deng reported on the front page of Friday’s Wall Street Journal that, “Beijing’s announcement Thursday that the U.S. and China have mutually agreed to roll back tariffs as part of a ‘phase one‘ trade accord lifted financial markets, but questions remained over how much ground—if any —the Trump administration had agreed to give.

“Optimism that the trade war was finally nearing an end was raised by comments from a Chinese Commerce Ministry spokesman in Beijing on Thursday.

“‘If the phase-one deal is signed, China and the U.S. should remove the same proportion of tariffs simultaneously based on the content of the deal,’ Chinese Commerce Ministry spokesman Gao Feng said at a regular press briefing. ‘This is what [the two sides] agreed on following careful and constructive negotiations over the past two weeks,’ he said.”

However, the Journal article cautioned that, “But there were conflicting reports from within the Trump administration as to whether there was a firm commitment to reduce tariffs.”

Ana Swanson, Keith Bradsher and Alan Rappeport The United States and China have agreed that an initial trade deal between the two countries would roll back a portion of the tariffs they are placing on each other’s products, officials from both countries said, a significant step toward defusing tensions between the world’s largest economies.

“The agreement has not yet been completed, and a deal could fail to materialize as it has in previous rounds of negotiations. But if a pact is reached, the Trump administration has committed to cutting some tariffs, American officials and other people with knowledge of the negotiations said.”

And Financial Times writers Tom Hancock and Demetri Sevastopulo reported late last week that, “China had long insisted that the trade war could only be eased if the US removed some of the tariffs Mr Trump has imposed since he started the economic fight last year.”

However, on Friday, Bloomberg News writers Mario Parker and Josh Wingrove reported that,

President Donald Trump said that the U.S. hasn’t agreed to roll back all tariffs on China, muddying hopes raised by China and even some of his own aides that the U.S. was ready to lift some tariffs to secure a trade deal.

“‘They’d like to have a rollback, I haven’t agreed to anything,’ Trump told reporters Friday. ‘China would like to get somewhat of a rollback — not a complete rollback, because they know I won’t do it.'”

Likewise, Alan Rappeport reported in Saturday’s New York Times that, “President Trump on Friday said he had not yet agreed to roll back any of the tariffs he had imposed on China and that, if a deal is reached, he would not eliminate all of the levies he’s placed on $360 billion worth of goods.

“His comments came after a day of White House infighting as the administration debates how many concessions to make in order to reach a trade pact that would help resolve a yearlong fight between the world’s largest economies.”

The Times article explained that, “Analysts have speculated that America’s tariffs could be phased out over time as China meets certain benchmarks, opens its markets to foreign firms, purchases billions of dollars of agricultural product from the United States and demonstrates that it is following through on commitments to respect American intellectual property.

“White House advisers are considering different strategies for rolling off existing tariffs, according to people briefed on their plans. One option is to roll more tariffs off initially, but set up a mechanism to have them snap back into place if China doesn’t keep its commitments to respect American intellectual property, open its markets to foreign firms and purchase billions of dollars of agricultural product from the United States. Another strategy would involve rolling off fewer tariffs up front and more after time as China meets certain commitments.”

Josh Zumbrun, Andrew Restuccia and Alex Leary reminded readers in Saturday’s Wall Street Journal that, “The U.S. has imposed its tariffs in four different tranches, with different tariff rates, ultimately covering about $360 billion worth of imports from China. The latest tranche was a 15% tariff on $111 billion of goods imposed on Sept. 1…[and]…The first three tranches, which went into effect at various points in 2018, now all have a 25% tariff rate, and cover about $250 billion of goods.”

The Journal writers pointed out that, “One intermediate option would be for the U.S. to dial back the consumer-focused September tariffs, but not remove any of the earlier levies.

“The U.S. also has a final tranche of tariffs, covering about $156 billion of goods, largely consumer goods like electronics and toys, currently planned for Dec. 15.”

Meanwhile, Wall Street Journal writer William Mauldin reported late last week that, “The U.S. and China are grappling with a dual challenge on trade:  wrapping up an interim deal, and solving the logistical puzzle of getting President Trump and Chinese President Xi Jinping in the same place to sign it.”

The Journal article noted that, “Mr. Trump told reporters Friday that he hoped to sign the agreement in the U.S., preferably in Iowa or somewhere else in ‘farm country.’

“Iowa is a politically important swing state where farmers have suffered due to a drop in Chinese purchases of U.S. farm goods, in retaliation to his tariffs on Chinese imports.

“While Mr. Xi has a prior connection to Iowa, former officials say the U.S. would likely have to make further concessions to China at the negotiating table to ‘pay’ for a U.S. signing ceremony that benefits Mr. Trump politically.”

Also on the China trade issue, Bloomberg writer Mike Dorning reported late last week that, “The U.S. Department of Agriculture is moving to allow imports of Chinese poultry in a sign of progress in ongoing trade talks between Washington and Beijing.

“An unpublished USDA regulation allowing the shipments was posted on the Federal Register website and is scheduled to be published Friday. The new permission covers birds as well as poultry parts and products slaughtered in certified Chinese facilities, the document shows.”

“USDA to Allow Chinese Poultry Imports in Sign of Trade Progress,” by Mike Dorning. Bloomberg News (November 7, 2019).

The Bloomberg article added that, “A compromise over poultry has been one of the areas of advanced discussions between the nations as they inch toward a partial trade deal. Last month, China said it was prepared to lift a ban on U.S. shipments that’s been in place since 2015 as part of a ‘Phase One’ agreement. On Thursday, Xinhua reported China’s General Administration of Customs and Ministry of Agriculture are studying the removal of curbs on American supplies.

Reuters News indicated last week that, “China has banned all U.S. poultry and eggs since January 2015 due to an avian influenza outbreak, which has been over for years. That caused imports to tank after the United States shipped $390 million worth of poultry and products to China in 2014. The following year, shipments were less than a fifth of that, at $74 million.”

Keith Good

Keith Good is the social media manager for the farmdoc project at the University of Illinois. He has previously worked for the USDA’s National Agricultural Statistics Service, and compiled the daily FarmPolicy.com News Summary from 2003-2015. He is a graduate of Purdue University (M.S.- Agricultural Economics), and Southern Illinois University School of Law.

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