December Begins With New Tariff Announcements, Uncertainty Over Existing Negotiations
U.S. trade disputes are expanding into new fronts, and tariffs on Chinese imports may be around until at least the 2020 election. On Monday, President Trump announced that the U.S. would be levying tariffs on imports of Brazilian and Argentinean steel and aluminum, effective immediately, and the U.S. Trade Representative (USTR) proposed a 100-percent tariff on certain French products, including champagne, handbags and cheese. Today in London, where President Trump is attending the NATO summit, he suggested that a trade deal with China may wait until after November’s election.
U.S. tariffs on Brazilian and Argentinean metal imports were first announced in March 2018 but were never implemented as the president granted the countries permanent exemptions. In Monday’s tweet announcing the restoration of the tariffs, the president said, “Brazil and Argentina have been presiding over a massive devaluation of their currencies, which is not good for our farmers.”
Observers note that both countries have, in fact, been working to strengthen their currencies against the dollar, and suggest other motivations are behind the announcement. Kim Catechis, head of investment strategy at international asset management firm Martin Currie, told Reuters, “For many Brazilians, this smells like revenge for their country’s soybean farmers bonanza—they have benefited enormously from the U.S.-China trade war by replacing U.S. soybean sales into China.”
Tariffs on approximately $2.4 billion in French products follows the USTR’s investigation of France’s Digital Services Tax, which it found to be discriminatory against U.S. companies, inconsistent with prevailing principles of international tax policy and unusually burdensome for affected U.S. companies.
“USTR’s decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies,” says Ambassador Robert Lighthizer. “Indeed, USTR is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy and Turkey. The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”
The president’s suggestion that the U.S. trade dispute with China may wait until after the 2020 election roiled markets, with the Dow Jones Industrial Average falling more than 450 points this morning. The S&P 500 was down 1.2 percent and the Nasdaq Composite slipped 1.3 percent. A 15-percent tariff on $160 billion in Chinese imports is expected to kick in on December 15 if the U.S. and China don’t reach at least a “phase one” trade agreement by the deadline.
A sticking point in the ongoing trade negotiations on the phase one deal is China’s insistence that the U.S. roll back some existing tariffs, not just delay proposed levies. The Global Times, a newspaper owned by China’s Communist Party, reports that the country’s negotiators require the phase outs in order for there to be a deal. Chinese officials are also said to be angry over President Trump’s recent signing of legislation supporting human rights in Hong Kong amidst the protests there.