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On trade war, Trump signals long struggle; more tariffs in works if deal stays stalled

by Compiled by Democrat-Gazette staff from wire reports | May 11, 2019 at 4:30 a.m.
U.S. Treasury Secretary Steve Mnuchin (center) speaks with Chinese Vice Premier Liu He (left) as trade talks concluded Friday after only a few hours. Mnuchin called the talks “constructive.”

WASHINGTON -- Trade talks between China and the United States ended on Friday without a deal as President Donald Trump raised tariffs on $200 billion worth of Chinese imports and signaled he was prepared for a prolonged economic fight.

Trump, who just weeks ago was predicting a signing ceremony for an "epic" trade deal with Chinese leader Xi Jinping, reclaimed his familiar stance of threatening China and insisting his aggressive approach would help the U.S. economy. In a flurry of tweets Friday, Trump warned that he would tax nearly all of China's imports if Beijing continued to backtrack on a trade deal.

"Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch!" Trump said Friday morning, adding that the Chinese "should not renegotiate deals with the U.S. at the last minute."

The toughened stance has thrust the world's two largest economies back into a trade war that just one week ago seemed on the cusp of ending. Talks between the United States and China broke down last weekend, after Trump and his advisers were taken aback by what they saw as China's attempt to renege on parts of an emerging trade deal.

Trump is now moving ahead with plans to impose 25% tariffs on an additional $325 billion of Chinese products -- meaning nearly all Chinese imports to the United States would be heavily taxed. Earlier, in a meeting with Chinese Vice Premier Liu He, U.S. officials said Beijing had three or four weeks to agree to a deal or face those additional tariffs.

On Friday afternoon, Trump suggested that the ball was in Beijing's court, saying "the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!"

China has threatened to retaliate with its own "countermeasures," which include ending purchases of American farm goods and erecting other nontariff barriers for companies trying to gain access to the Chinese market.

Targeted products

Friday's tariffs largely affect imports of business equipment but also $40 billion in consumer products.

The official $200 billion tariff list starts with "frozen retail cuts of meat of swine" and ends with "monopods, bipods, tripods and similar articles of aluminum." In between are 194 pages of products that can be found on store shelves across the country.

Also on the tariff list are toilet paper, art supplies, ceramic tiles, CD cases, CD players, cassette tapes and cassette players, dyed knitted or crocheted cotton fabrics, Christmas tree lights and anvils.

The financial impact of the tariffs could be delayed because it will apply only to products that left China on Friday, which often take two or three weeks to arrive from Shanghai. But businesses often pass these costs on to consumers, which could drive up prices across the country.

While discussions resumed in Washington on Friday, they lasted only a few hours and no further negotiations are scheduled. Trump called the discussions "candid and constructive" and Liu said the talks went "fairly well."

Stock markets fell in early morning trading, with the S&P 500 down more than 1%, but regained some ground after Treasury Secretary Steven Mnuchin told reporters that the discussions were "constructive."

It remains unclear whether the two countries can salvage a trade agreement that is complicated by political dynamics on both sides of the Pacific. Trump, who has promised to be tough on China, is eager to avoid being seen as signing a weak deal that does not take advantage of the leverage the United States has created with its tariffs. But Xi is also facing pressure from hard-liners within China, who do not want to acquiesce to the United States, particularly U.S. demands that China make changes to its laws.

Trump in the past has threatened severe penalties only to back down days later, but he has also shown a willingness to dig in and trust his instincts, even if advisers have warned against it. He believes the strength of the economy gives him leverage to use aggressive trade tactics.

"At this stage, it is difficult to envision this as a bluff anymore," said Eswar Prasad, a senior professor of trade policy at Cornell University. "He seems deadly serious about taking on China in a broad economic confrontation irrespective of the consequences to the U.S. economy."

Tim Keeler, a former chief of staff at the U.S. trade representative, said it would normally take four to six weeks of hearings and a public comment period to put additional tariffs in place, though Trump could try to expedite that process. "It puts them in a much stronger legal position, domestically, if they go through the notice and comment process," Keeler said.

The president said Friday that talks with China were conducted "in a very congenial manner" but that "there is absolutely no need to rush."

Trump continued to insist that his tough approach to China would benefit the U.S. economy, particularly farmers, who have faced retaliation from China as a result of the trade war. The United States has been pressing China to buy more American agriculture products, including soybeans, as part of the emerging trade deal.

Impact on farmers

Trump appears to be sensitive to the fact that farmers-- part of the coalition that put him in office -- could bear the brunt of additional retaliation from China.

Trump said Friday on Twitter that the U.S. would use revenue from tariffs to buy the output from America's farms "in larger amounts than China ever did," even though the administration has yet to dole out all of the $12 billion in aid set aside last year after Beijing imposed retaliatory duties on agricultural products in the first round of the trade war.

The president said the government-purchased farm goods would get shipped "to poor & starving countries in the form of humanitarian assistance." But he gave no details on how such a program would be administered. Agriculture Secretary Sonny Perdue, who is in Japan for talks, said in a tweet that the president "directed USDA to work on a plan quickly."

Roger Johnson, president of the National Farmers Union, the second-biggest U.S. general farm group, expressed concern with Trump's tweet about buying up farm products.

"That's a very different thing than assistance to farmers," Johnson said. He said dumping supplies in other countries could further depress prices and also jeopardize those fragile largely agrarian economies.

Joseph Glauber, former chief economist at USDA, said corn and soybeans are typically animal feed and not food aid, which usually consists of wheat and rice. Such a move also would also invite further trade disputes, since they would likely be judged export subsidies prohibited by the World Trade Organization, if they weren't seen as humanitarian aid, Glauber said.

In Shelby County, Ind., Phil Ramsey said he appreciated the president's reasons for revisiting trade deals, but said the ailing farm economy had been brutal in deeply personal ways. He said he was going without health insurance to save money. He said he has delayed some equipment purchases.

"I was very patient a year ago," said Ramsey, who grows corn, soybeans and wheat. "I've gone from being very patient to being very anxious."

But Ramsey, a Republican who voted for the president, said his primary frustrations were with China, and also Congress, which has not approved a new trade deal with Canada and Mexico.

Information for this article was contributed by Alan Rappeport, Ana Swanson, Jim Tankersley and Mitch Smith of The New York Times; by Mario Parker of Bloomberg News; and by Taylor Telford and Damian Paletta of The Washington Post.

A Section on 05/11/2019

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