White House expects retaliation from China over increased tariffs

By Easton Contributor – July 16 2019

White House expects retaliation from China over increased tariffs, economic adviser Larry Kudlow admits, as Trump ramps up trade war

The U.S. is awaiting retaliation from China over increased tariffs, after talks in Washington ended without a deal on trade, the president‘s chief economic adviser said on Sunday.

‘The expected countermeasures have not yet materialized. We may know more today or even this evening or tomorrow,‘ Larry Kudlow told ‘Fox News Sunday.‘ 

Kudlow also said that President Donald Trump‘s plan to raise US tariffs on Chinese goods across the board could take months to take effect.

‘Call it a couple of months. Call it three months. I don‘t know. That will take some time and then of course the president‘s going to have to make the final decision on that,‘ Kudlow said.

He also said there was a ‘strong possibility‘ that Trump will meet with Chinese President Xi Jinping at a G20 summit in Japan in late June. 

Until last week, there were expectations Trump and Xi would sign a trade deal at the summit. 

Kudlow, in a striking exchange wit ‘Fox News Sunday‘ host Chris Wallace, contradicted Trump‘s assertion that China is paying for the tariffs. 

Trump has claimed that China is paying for the tariffs but it is importers – usually U.S. companies or the U.S.-registered units of foreign companies – that have to pay. 

And U.S. farmers, a key constituency of Trump, have been among the hardest hit in the trade war, with soybean shipments to China dropping to a 16-year low in 2018.

Asked who was paying, Kudlow said on Sunday that ‘both sides will suffer on this,‘ although he added that the U.S. economy should be able to cope.

‘We‘re in terrific shape in order to correct 20 years plus of unfair trading practices with China … I think this is a risk we should and can take without damaging our economy in any appreciable way,‘ he said.

But Wallace pressed him on the issue.

‘It‘s not China that pays tariffs. It‘s the American importers, the American companies that pay what in effect is a tax increase and oftentimes passes it on to U.S. consumers,‘ Wallace said.

‘Fair enough. In fact, both sides will pay in these things, and of course it depends,‘ Kudlow responded. 

The United States began raising tariffs on $200 billion in Chinese imports from 10 per cent to 25 per cent on Friday after American officials accused Beijing of backtracking on commitments made in earlier rounds of negotiations.

Talks in Washington broke off on Friday without a deal on trade, but both sides have indicated that future talks are likely.

Trump warned China on Saturday that it should strike a trade deal with the United States now, otherwise an agreement would be ‘far worse for them if it has to be negotiated in my second term.‘ 

‘I think that China felt they were being beaten so badly in the recent negotiation that they may as well wait around for the next election, 2020, to see if they could get lucky & have a Democrat win,‘ Trump tweeted. 

‘The only problem is that they know I am going to win (best economy & employment numbers in U.S. history, & much more), and the deal will become far worse for them if it has to be negotiated in my second term. Would be wise for them to act now, but love collecting BIG TARIFFS!‘ he added.

Vice Premier Liu He, China‘s top economic adviser, sought to defend the changes in talks with senior U.S. officials in Washington on Thursday and Friday, arguing that China could accomplish the policy changes through decrees issued by its State Council, or cabinet, sources familiar with the talks said.

But U.S. Trade Representative Robert Lighthizer rejected that, telling Liu that the United States was insisting on restoration of the previous text.

‘We would like to see these corrections in an agreement which is codified by law in China, not just a State Council announcement. We need to see something much clearer. And until we do we have to keep our tariffs on,‘ Kudlow said.

China strongly opposes the latest U.S. tariff hike, and has to respond to that, Liu told reporters on Saturday. 

Beijing retaliated for previous tariff hikes by raising duties on $110 billion of American imports. And officials have targeted American companies operating in China by slowing customs clearance and stepping up regulatory scrutiny.

Republican Sen. Rand Paul told ABC‘s ‘This Week‘ on Sunday that he advised the president to finalize a trade deal with China soon, ‘because the longer we‘re involved in a tariff battle or a trade war, the better chance there is that we could actually enter into a recession because of it.‘

The two countries are sparring over U.S. allegations that China steals technology and pressures American companies into handing over trade secrets, part of an aggressive campaign to turn Chinese companies into world leaders in robotics, electric cars and other advanced industries.

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