U.S. hikes tariffs on China-made auto parts, other goods


Automotive News | 2019-5-10

The United States increased tariffs Friday on $200 billion in goods from China and threatened to impose more in the most dramatic steps yet to extract trade concessions, with U.S. President Donald Trump saying there¡¯s ¡°no need to rush¡± a deal even though the uncertainty is roiling markets and clouding the global economy.

Auto parts ranked 10th on the list of products facing the higher tariffs with a value of $2.3 billion, according to the U.S. International Trade Commission.

China said it will be forced to retaliate, though the government didn¡¯t immediately specify how. The moves came after discussions between made little progress Thursday, according to people familiar with the talks.

Chinese Vice Premier Liu He arrived at the U.S. Trade Representative¡¯s office on Friday morning for a second day of talks with Trump¡¯s top trade negotiator Robert Lighthizer and Treasury Secretary Steven Mnuchin.

¡°Talks with China continue in a very congenial manner -- there is absolutely no need to rush,¡± the U.S. president said on Twitter on Friday, before talks resumed. ¡°In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!¡±

U.S. stocks fell for a fifth day on Friday, after Asian equities whipsawed in heavy trading.

The fresh wave of U.S. tariffs marked a sharp reversal from just last week, when U.S. officials expressed optimism that a pact was within reach. The escalation with China also signaled Trump¡¯s willingness to risk more economic and political damage on his apparent belief that trade wars ultimately are winnable.

In one of his tweets on Friday, Trump also said ¡°the process has begun¡± to impose 25 percent tariffs on a further $325 billion in goods from China. That raises the prospect of all of China¡¯s goods exports to the U.S. -- worth about $540 billion last year -- being subject to new import duties.

Such a move would take weeks to deploy. But it would have significant repercussions for the U.S., Chinese and global economies. Economists at Moody¡¯s Analytics said in a report this week that an all-out trade conflagration between the world¡¯s two-largest economies risked tipping the U.S. economy into recession by the end of 2020 just as voters go to the polls in the U.S.

China's new light-vehicle market, after years of heady growth, posted its first decline in 2018 in decades and sales are on track to fall or be flat in 2019, analysts and automakers say.

Bloomberg Economics calculates the higher duties will raise the drag on Chinese growth to 0.9 percentage point from 0.5 percentage point. The International Monetary Fund estimates the pullback on the U.S. expansion at about 0.2 point, and potentially more if there¡¯s a blow to markets and confidence.

¡°The trade truce, one of the pillars on which optimism about global growth is based, appears to be crumbling. We¡¯ll see how talks in D.C. go on Friday. Assuming there¡¯s no speedy resolution and higher tariffs remain in place, forecasts for global growth will be shaded down, with the main blow landing on China and its Asian neighbors."

In addition to auto parts, the U.S. on Friday increased the punitive tariff to 25 percent from 10 percent on 5,700 different product categories from China -- ranging from cooked vegetables to Christmas lights and highchairs for babies.

Some close observers said they were not hopeful for any meaningful breakthroughs on Friday. One person familiar with the discussions said that U.S. officials were unsure whether Liu had the authority to make any meaningful commitments. It was also unclear whether China had resolved the internal debates that had led to last week¡¯s rescinding of prior commitments to enshrine reforms agreed in Chinese law.

U.S. officials have said the new duties -- introduced on just five days¡¯ notice -- will not apply to goods already on boats headed for American shores. A 25 percent tariff is already in place on a further $50 billion in imports from China.

Some American industries were quick to decry Trump¡¯s decision, which will hurt some of his key political constituencies, including farmers and manufacturers.

The tariffs will ¡°suppress job gains for the industry by as much as 400,000 over 10 years. It will also invite China to hit back at American businesses, farmers, communities, and families,¡± said Kip Eideberg, vice president of government affairs for the Association of Equipment Manufacturers.

Under pressure

Before the latest round of meetings, Liu told Chinese state media he was coming to Washington under pressure but ¡°with sincerity¡± and warned that a move to raise tariffs by the U.S. starting Friday was not a solution.

Earlier on Thursday, Trump sought to calm U.S. financial markets after he insisted it was still possible to reach a deal this week, even as he reiterated plans to raise tariffs on Chinese goods. Trump also said he may hold a phone call with his Chinese counterpart, Xi.

¡°He just wrote me a beautiful letter, I just received it, and I¡¯ll probably speak to him by phone, but look, we have two great alternatives, our country is doing fantastically well,¡± Trump said. ¡°Our alternative is an excellent one, it¡¯s an alternative I¡¯ve spoken about for years. We¡¯ve taken well over $100 billion from China in a year.¡±

China has disputed the U.S. characterization that the country reneged on prior commitments. But it has also sent its own signals that a deal could take time.

¡°There¡¯s definitely disappointment and frustration¡± in China, said Zhu Ning, deputy director of the National Institute of Financial Research at Tsinghua University in Beijing. ¡°We thought we were on a good path of making progress and having a deal."

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