By Bob Davis and Lingling Wei
A worker checks wind turbine blades at a factory in Lianyungang, China.
As Washington and Beijing struggle to break a trade impasse, administration advisers are urging President Trump to raise the stakes with a sharp increase in the level of tariffs proposed for $200 billion in Chinese imports targeted for punitive measures.
Trump administration advisers are debating measures that might bring Chinese negotiators to the table.
Trump administration advisers are debating measures that might bring Chinese negotiators to the table.
They are pushing the president to apply tariffs as high as 25% on $200 billion of Chinese imports, up from an original proposal for 10%.
The White House won’t make a final decision until at least late August on those tariffs, which are likely to target consumer goods and food as well as machinery components.
The White House won’t make a final decision until at least late August on those tariffs, which are likely to target consumer goods and food as well as machinery components.
Advisers are justifying the steeper tariffs, in part, to make up for the rapid depreciation of the yuan in recent months.
Since May 30, the yuan has fallen 6% against the dollar.
“Once you go down the road of using tariffs to disrupt the Chinese, you have to say 25% compared to 10%,” said Derek Scissors, a China expert at the American Enterprise Institute who advises the administration on trade.
The U.S. has already imposed 25% tariffs on $34 billion worth of Chinese imports and is on schedule to levy similar tariffs on an additional $16 billion of goods, probably this week or next.
The additional $200 billion would be the next step, should the U.S. make good on Mr. Trump’s threat to ratchet up pressure and, if needed, impose tariffs on all $505 billion in goods China ships to the U.S. should negotiations fail to reach a favorable outcome.
The debate over tariff levels comes as Washington has yet to make meaningful progress in settling its market-rattling trade dispute with Beijing.
“Once you go down the road of using tariffs to disrupt the Chinese, you have to say 25% compared to 10%,” said Derek Scissors, a China expert at the American Enterprise Institute who advises the administration on trade.
The U.S. has already imposed 25% tariffs on $34 billion worth of Chinese imports and is on schedule to levy similar tariffs on an additional $16 billion of goods, probably this week or next.
The additional $200 billion would be the next step, should the U.S. make good on Mr. Trump’s threat to ratchet up pressure and, if needed, impose tariffs on all $505 billion in goods China ships to the U.S. should negotiations fail to reach a favorable outcome.
The debate over tariff levels comes as Washington has yet to make meaningful progress in settling its market-rattling trade dispute with Beijing.
Treasury Secretary Steven Mnuchin and Chinese envoy Liu He and their staffs continue to talk about a possible meeting, said officials in both capitals, but the talks remain at a very preliminary stage.
Both sides argue that it is up to the other to make the first move after several preliminary Chinese offers, mainly involving the purchase of more U.S. goods, were rejected by Mr. Trump as inadequate.
The two sides have agreed that their initial offers weren’t a solid base for further negotiations, according to a senior member of the U.S. business community tracking the discussions.
Both sides argue that it is up to the other to make the first move after several preliminary Chinese offers, mainly involving the purchase of more U.S. goods, were rejected by Mr. Trump as inadequate.
The two sides have agreed that their initial offers weren’t a solid base for further negotiations, according to a senior member of the U.S. business community tracking the discussions.
Those included the Chinese offering mainly to buy U.S. goods, and the U.S. demanding that China essentially scrap the industrial policy that turned it into an economic powerhouse, the senior executive said.
“They are discarding useless ideas and rhetoric,” the executive said.
“They are discarding useless ideas and rhetoric,” the executive said.
“They are figuring out what could be on an agenda and what could be a solution.”
Mr. Mnuchin said at Group of 20 meeting last week in Buenos Aires that he and members of the Chinese delegation engaged in “chitchat.”
Some pro-China hands have been urging a resumption of talks and been working with Washington and Beijing to get the discussions started.
Mr. Mnuchin said at Group of 20 meeting last week in Buenos Aires that he and members of the Chinese delegation engaged in “chitchat.”
Some pro-China hands have been urging a resumption of talks and been working with Washington and Beijing to get the discussions started.
They include former Treasury Secretary Hank Paulson, who was Mr. Mnuchin’s boss at Goldman Sachs Group Inc., and Blackstone Group LP Chief Executive Stephen Schwarzman, said people familiar with the efforts.
The administration believes it strengthened its hand last week with a tentative trade accord with the European Union.
The administration believes it strengthened its hand last week with a tentative trade accord with the European Union.
The two sides agreed to use the World Trade Organization to deal with intellectual-property theft, government pressure on companies to transfer technology and the operation of state-owned industries—all code words for trade infractions by Beijing.
With the agreement, China is “in a very difficult position,” Lawrence Kudlow, director of the National Economic Council, said Sunday on CBS.
With the agreement, China is “in a very difficult position,” Lawrence Kudlow, director of the National Economic Council, said Sunday on CBS.
“China is, I think, being isolated.”
Whatever gains the U.S. might have made with Europe, however, haven’t eased the trade fight with Beijing.
Whatever gains the U.S. might have made with Europe, however, haven’t eased the trade fight with Beijing.
China presses U.S. companies to hand over valuable technology and uses unfair trade practices to produce an enormous trade surplus with the U.S.
The Trump administration remains deeply divided over how best to deal with the Chinese, and the two main factions are moving in different directions.
The Trump administration remains deeply divided over how best to deal with the Chinese, and the two main factions are moving in different directions.
China trade realists, led by U.S. Trade Representative Robert Lighthizer, believe China will make concessions only if it feels the brunt of heavy tariffs.
Trade doves, led by Messrs. Mnuchin and Kudlow, have been looking for a solution short of massive tariffs.
Trade doves, led by Messrs. Mnuchin and Kudlow, have been looking for a solution short of massive tariffs.
Mr. Mnuchin and Liu have continued to discuss U.S. China relations, but some of those conversations have gone poorly.
In one indication of the strain between the two countries, Qualcomm Inc. last week had to scuttle its agreement to purchase Dutch company NXP Semiconductors NV after China didn’t give the deal the green light.
In one indication of the strain between the two countries, Qualcomm Inc. last week had to scuttle its agreement to purchase Dutch company NXP Semiconductors NV after China didn’t give the deal the green light.
Days earlier, Mr. Mnuchin called Liu to lobby for its approval, according to people familiar with the matter.
Mr. Mnuchin didn’t believe the call had gone well, the people said.
The Chinese decision was a blow to Mr. Trump, who had worked to reduce U.S. penalties on Chinese telecomm giant ZTE Corp., which was accused of violating U.S. sanctions against Iran and North Korea.
The Chinese decision was a blow to Mr. Trump, who had worked to reduce U.S. penalties on Chinese telecomm giant ZTE Corp., which was accused of violating U.S. sanctions against Iran and North Korea.
Some U.S. government and industry officials had naively expected the ZTE efforts would prompt China to reciprocate and approve the Qualcomm-NXP deal.
Previous negotiations have led the Chinese to be skeptical Mr. Mnuchin can deliver a trade deal.
Previous negotiations have led the Chinese to be skeptical Mr. Mnuchin can deliver a trade deal.
Liu had proposed to buy nearly $70 billion of U.S. farm, energy and other products last month, which Beijing thought went a long way to meet Mr. Trump’s demand to cut the bilateral trade deficit by $200 billion.
But Mr. Trump rejected that proposal.
“The two sides just keep talking past each other,” said a person familiar with the discussions.
The scale of the U.S. tariff offensive has Beijing on edge.
The scale of the U.S. tariff offensive has Beijing on edge.
The Chinese leadership is dealing with economic headwinds, including weakening investment and household consumption, as well as rising corporate defaults.
The trade tensions threaten to put growth further at risk.
Beijing, however, has been preparing for a long fight.
Beijing, however, has been preparing for a long fight.
On Tuesday, Xi Jinping oversaw a high-level meeting that signaled a shift in economic priorities toward supporting growth through means such as debt control.
The meeting laid out a range of pro-growth measures, such as greater spending on infrastructure and easier credit for banks and businesses.
Chinese officials have also been weighing how far to press the pledged retaliation against the U.S. on trade without hurting other national interests.
Chinese officials have also been weighing how far to press the pledged retaliation against the U.S. on trade without hurting other national interests.
Measures being rolled out so far include holding up licenses for U.S. businesses, delaying approval of mergers and acquisitions involving U.S. companies, and ramping up inspections of American products at China’s borders.
Beijing is also wary of pushing so far as to cause U.S. businesses to leave China—which could be a blow to Beijing’s effort to attract foreign capital and keep its citizens employed at a time of growing economic contraction.
Beijing is also wary of pushing so far as to cause U.S. businesses to leave China—which could be a blow to Beijing’s effort to attract foreign capital and keep its citizens employed at a time of growing economic contraction.
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