U.S. Businesses Bash Tariffs as China Talks Intensify

U.S. companies and business groups are lining up to oppose the Trump administration’s plan to slap tariffs on Chinese imports, as the two nations step up efforts to resolve their trade dispute.

About 120 firms and industry groups are scheduled to testify at a hearing beginning Tuesday on the administration’s plan to impose tariffs on $50 billion in Chinese goods. So many groups signed up that the U.S. Trade Representative’s Office extended the hearing by two days until Thursday. The USTR has received more than 2,700 comments.

The hearing coincides with a planned trip to Washington by Chinese President Xi Jinping’s top economic adviser for broader trade negotiations. The visit is a follow-up to talks led by U.S. Treasury Secretary Steven Mnuchin in Beijing earlier this month, when they failed to bridge their wide differences.

Companies including U.S. Steel Corp., Best Buy Co., and General Electric Co., as well as lobby groups such as the National Retail Federation, Consumer Technology Association, and National Association of Manufacturers, are set to testify this week. While they’re generally supportive of U.S. action to level the playing field on trade and investment with China, many want the talks to focus on resolving differences rather than the pursuit of tariffs.

Sanden International (U.S.A.) Inc., based in Wylie, Texas, which makes automotive air-conditioning compressors, estimated the proposed tariffs on the components it imports from China would require the firm to pay an additional $3.5 million in duties a year.

George Tuttle III, a lawyer testifying on behalf of the company, said the firm would need to cut 39 people from its 431 employees in Wylie if the tariffs go into effect and defer or cancel additional capital investment.

Tariff Favor

Some companies, such as AK Steel Corp., are in favor of President Trump’s plans to slap duties on Chinese goods to punish the Asian nation for abuse of U.S. intellectual property.

SolarWorld Americas asked the administration to add solar cells and modules to the list of products the U.S. has proposed for tariffs. Chinese hackers stole thousands of sensitive files from SolarWorld beginning in 2012, paving the way for lower-cost Chinese competitors to enter the market earlier than expected, said Tim Brightbill, a lawyer with Wiley Rein LLP in Washington who testified for the company.

“SolarWorld and the domestic solar industry have been devastated by the Chinese government’s policies and practices with respect to technology, intellectual property, and innovation,” Brightbill said.

In January, Trump imposed new safeguard tariffs on solar panel imports to protect American manufacturers against cheaper competition, benefiting SolarWorld.

Duty Opposition

U.S. manufacturers, consumer products companies, and technology groups that filed written submissions opposing the planned Chinese tariffs say they would raise input costs and consumer prices and draw crippling retaliatory duties from China.

“Tariffs are hidden, regressive taxes that will be paid by U.S. businesses and consumers, paradoxically harming U.S. competitiveness,” the U.S. Chamber of Commerce said in written testimony filed before the hearing.

The industry backlash against the planned tariffs comes amid signs the president may be seeking a less confrontational approach to Beijing. In a surprise twist, Trump said on Sunday he’s working with Xi to get ZTE Corp. “back into business fast.”

The Commerce Department is now reviewing alternative options to sanctions on the Chinese mobile phone-maker for violating the terms of a 2017 settlement, then lying about it. ZTE’s business has come to a standstill since the U.S. last month imposed a seven-year ban on purchases of technology from key American suppliers.

Washington Negotiations

Trump’s pledge to help ZTE may bode well for ongoing trade talks between the world’s two biggest economies. Vice Premier Liu He, Xi’s top economic aide, is expected to visit Washington from May 15 to 19 for high-level trade negotiations.

Tension between the U.S. and China has roiled financial markets and raised fears the world’s two biggest economies may stumble into a trade war. The International Monetary Fund has warned that a global trade war could undermine one of the broadest world upswings in years.

Trump proposed the tariffs after USTR concluded China violates U.S. intellectual property in a variety of ways, including by forcing American companies to transfer technology. Last month, the administration released a list of $50 billion of proposed products to be hit with tariffs, from semiconductor components to sewing-machine needles.

After China promised to retaliate with tariffs in kind on soybeans and other U.S. exports, Trump suggested the amount should be raised by $100 billion. The U.S. hasn’t released a list to meet that expanded goal, and the administration hasn’t specified when any of the duties will take effect, opening the door to companies to try to shape Trump’s plans. A comment period on the first $50 billion in proposed duties ends May 22.

Tariff Dilemma

The tariff issue has laid bare a dilemma for U.S. companies, many of which are disappointed with the progress China has made on economic reforms but don’t want to be drawn into a diplomatic dispute that would hurt their interests.

In its written testimony, the Chamber of Commerce said President George W. Bush’s tariffs on steel resulted in 200,000 job losses and $4 billion in lost wages in 2002, and President Barack Obama’s duties on tires imported from China led to 2,500 job losses and cost U.S. consumers $1.1 billion in 2011.

Some companies and trade groups are calling for tariffs to be added to certain products because they face a competitive disadvantage with the separate duties on steel and aluminum imports, imposed earlier this year, raising their costs.

AK Steel Chief Executive Officer Roger K. Newport said in his written comments that the company supports the tariffs to combat China’s efforts to gain access to the technological advancements that took years to research and develop. Without adequate protection, the company said it’s unlikely to make significant future investments.

From: Bloomberg

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.