Blue chips chip­per about tar­iff grace pe­riod

Trump puts off new trade war salvo to Dec. 15

Las Vegas Review-Journal - - FRONT PAGE - By Paul Wiseman and Christo­pher Rugaber The As­so­ci­ated Press

WASHINGTON — The Trump ad­min­is­tra­tion is de­lay­ing most of the im­port taxes it planned to im­pose on Chi­nese goods and is drop­ping oth­ers al­to­gether.

The an­nounce­ment Tues­day from the Of­fice of the U.S. Trade Rep­re­sen­ta­tive was greeted with re­lief on Wall Street and by re­tail­ers, who have grown fear­ful that the new tar­iffs would wreck hol­i­day sales.

The ad­min­is­tra­tion says it still plans to pro­ceed with 10 per­cent tar­iffs on about $300 bil­lion in Chi­nese im­ports, ex­tend­ing its im­port taxes to just about ev­ery­thing China ships to the United States, in a dis­pute over Bei­jing’s strong-arm

trade poli­cies.

But un­der pres­sure from re­tail­ers and other busi­nesses, Pres­i­dent Don­ald Trump’s trade of­fice said it would de­lay the tar­iffs un­til Dec. 15. The new taxes, which af­fect nearly 60 per­cent of the im­ports, had been set to start Sept. 1.

Among the prod­ucts that will ben­e­fit from the re­prieve are such pop­u­lar con­sumer goods as cell­phones, lap­tops, video game con­soles, some toys, com­puter mon­i­tors, shoes and cloth­ing.

The ad­min­is­tra­tion is also re­mov­ing other items from the tar­iff list en­tirely.

Sep­a­rately, China’s Min­istry of Com­merce reported that top Chi­nese ne­go­tia­tors had spo­ken by phone with their U.S. coun­ter­parts, Trade Rep­re­sen­ta­tive Robert Lighthizer and Trea­sury Sec­re­tary Steven Mnuchin, and planned to talk again in two weeks.

The news sent the Dow Jones Industrial Av­er­age soar­ing more than 400 points in mid-af­ter­noon trad­ing. Shares of Ap­ple, Mat­tel and shoe brand Steve Mad­den, which stand to ben­e­fit from the de­layed tar­iffs, led the rally.

Speak­ing to re­porters in New Jer­sey, Trump con­firmed that he had de­cided to de­lay the tar­iffs, which could force re­tail­ers to raise prices, to avoid the eco­nomic pain that could re­sult dur­ing the hol­i­day pe­riod.

“We’re do­ing (it) just for Christ­mas sea­son, just in case some of the tar­iffs could have an im­pact,” the pres­i­dent said.

Trump has re­peat­edly ar­gued that his tar­iffs are hurt­ing China, not Amer­i­can con­sumers. But by de­lay­ing higher tar­iffs on con­sumer goods, Trump is tac­itly ac­knowl­edg­ing that his im­port taxes stand to squeeze Amer­i­can house­holds, too.

Tar­iffs are taxes paid by U.S. im­porters, not by China, and are of­ten passed along to U.S. busi­nesses and con­sumers through higher prices.

Jay Foreman, CEO of the toy com­pany Ba­sic Fun, said he’s pleased that the 10 per­cent tar­iffs have been de­layed for prod­ucts like his un­til De­cem­ber. His com­pany, based in Boca Ra­ton, Florida, had al­ready set prices for the hol­i­day sea­son and would have had to ab­sorb the im­pact of the tar­iffs.

Foreman said he is con­sid­er­ing lay­offs this fall to off­set his higher costs and noted that de­spite Trump’s re­prieve, tar­iffs re­main a se­vere threat.

To­gether, the news of ne­go­ti­a­tions and tar­iff de­lays pro­vided at least a respite af­ter weeks of height­ened U.s.-china trade ten­sions. The re­lief might prove only tem­po­rary, though, if the tar­iffs even­tu­ally take full ef­fect and Bei­jing re­tal­i­ates against U.S. ex­ports.

The Trump ad­min­is­tra­tion is fight­ing the Chi­nese regime over al­le­ga­tions that Bei­jing steals trade se­crets, forces for­eign com­pa­nies to hand over tech­nol­ogy and un­fairly sub­si­dizes its own firms. Those tac­tics are part of Bei­jing’s drive to be­come a world leader in such ad­vanced tech­nolo­gies as ar­ti­fi­cial in­tel­li­gence and elec­tric cars.

But 12 rounds of talks have failed to pro­duce any res­o­lu­tion. Frus­trated with the lack of progress, Trump raised the tar­iffs on $200 bil­lion in Chi­nese im­ports from 10 per­cent to 25 per­cent in May and said Aug. 1 that he’d im­pose 10 per­cent taxes on an ad­di­tional $300 bil­lion on Sept. 1.

On Sun­day, econ­o­mists at Gold­man Sachs down­graded their eco­nomic fore­casts, cit­ing the im­pend­ing tar­iffs on con­sumer goods. And econ­o­mists at Bank of Amer­ica Mer­rill Lynch have raised their odds of a re­ces­sion in the next year to roughly 33 per­cent, up from about 20 per­cent.

Gold­man said the tar­iffs on China have in­creased un­cer­tainty for busi­nesses, which will likely cause them to pull back on hir­ing and in­vest­ing in new equip­ment or soft­ware. Trump’s tar­iffs on Chi­nese goods have also weighed down stock prices lower, which could de­press spend­ing by wealth­ier Amer­i­cans, Gold­man found.

“It’s pretty clear that the prob­lem with (Trump’s) tar­iff tac­tics is it’s bad for the econ­omy,” said David Dol­lar, a China spe­cial­ist at the Brook­ings In­sti­tu­tion and a for­mer of­fi­cial at the World Bank and U.S. Trea­sury. “You try to use the weapon, but then you get blow­back on your own peo­ple.”

De­spite the ex­changes be­tween the U.S. and Chi­nese ne­go­tia­tors, the prospects for ne­go­ti­a­tions re­main dim. A sub­stan­tive deal would re­quire China to scale back its as­pi­ra­tions to be­come a tech su­per­power. And re­la­tions be­tween the coun­tries have been strained by mis­trust.

The best pos­si­ble out­come, Dol­lar said, likely would be a “mini-deal” in which China agrees to buy more Amer­i­can prod­ucts and nar­row the gap­ing U.S. trade deficit with China. In ex­change, per­haps the United States would lift some sanc­tions on the Chi­nese telecom­mu­ni­ca­tions gi­ant Huawei, which the U.S. sees as a na­tional se­cu­rity risk.

So far, Trump’s tar­iffs have failed to get Pres­i­dent Xi Jin­ping to yield to the U.S. de­mands.

“I don’t think we’re any closer to a deal,” said Scott Kennedy, who an­a­lyzes China’s econ­omy at the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies. “I don’t think there will be any deal dur­ing the Trump ad­min­is­tra­tion.”

The de­ci­sion to de­lay the tar­iffs “shows that the two economies are in­ter­de­pen­dent and that in­ter­de­pen­dence ben­e­fits many Amer­i­cans” by pro­vid­ing af­ford­able goods, Kennedy said.

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