Trump holds off on China tar­iffs

WOULD LIMIT IM­PACT ON HOL­I­DAY SHOP­PING An­other re­ver­sal as un­cer­tainty weighs on econ­omy


The White House on Tues­day said it would de­lay im­pos­ing tar­iffs on Chi­nese im­ports of cell­phones, lap­top com­put­ers, video game con­soles, and cer­tain types of footwear and cloth­ing un­til Dec. 15, sig­nif­i­cantly later than the Sept. 1 dead­line Pres­i­dent Trump had re­peat­edly threat­ened.

The an­nounce­ment, which came from the Of­fice of the U.S. Trade Rep­re­sen­ta­tive, en­sures that Ap­ple prod­ucts and other ma­jor con­sumer goods would be shielded from the im­port tax un­til at least De­cem­ber, po­ten­tially keep­ing costs on these prod­ucts down dur­ing the hol­i­day shop­ping sea­son. It was the lat­est in a se­ries of un­ex­pected an­nounce­ments and re­ver­sals by Trump as the White House at­tempts to pres­sure China to change long-stand­ing eco­nomic prac­tices. The con­fu­sion and un­cer­tainty has weighed on the econ­omy, lead­ing com­pa­nies to tighten up in­vest­ment as they wait for a res­o­lu­tion.

White House of­fi­cials have been split over how to pro­ceed with China. Some, in­clud­ing Trea­sury Sec­re­tary Steven Mnuchin and Na­tional Eco­nomic Coun­cil Di­rec­tor Larry Kud­low, have ex­pressed op­ti­mism that a deal could be reached. But Trump and se­nior trade ad­viser Peter Navarro have de­fended the tough tac­tics, say­ing they are nec­es­sary to change Chi

na’s be­hav­ior.

Tues­day’s an­nounce­ment re­flected a more cau­tious ap­proach, and it moved stocks sharply higher. The Dow Jones industrial av­er­age jumped af­ter the news and fin­ished the day 373 points, or more than 1.4 per­cent, higher. The stock prices of Ap­ple, Best Buy, Mat­tel and Macy’s were among those that ral­lied on the an­nounce­ment.

The an­nounce­ment ef­fec­tively shields more than $100 bil­lion in Chi­nese im­ports from tar­iffs un­til Dec. 15.

Shortly af­ter the an­nounce­ment, Trump told re­porters that he de­layed the tar­iffs “just in case” they would have a neg­a­tive im­pact on U.S. shop­pers this hol­i­day sea­son. This marked the most ex­plicit ad­mis­sion he has made so far that the tar­iffs could have raised costs for Amer­i­can con­sumers and busi­nesses and had a neg­a­tive im­pact on the econ­omy.

Trump has for weeks in­sisted that higher tar­iffs are some­how paid for by the Chi­nese gov­ern­ment, even though tar­iffs are im­posed as a form of cus­toms duty that is paid for by U.S. im­porters.

“What we’ve done is we’ve de­layed it so they won’t be rel­e­vant in the Christ­mas shop­ping sea­son,” Trump said be­fore board­ing a flight to west­ern Penn­syl­va­nia. “Just in case they might have an im­pact on peo­ple.”

The econ­omy has shown signs of slow­ing this year, and some busi­ness ex­ec­u­tives, law­mak­ers and White House of­fi­cials had wor­ried that the tar­iffs were dam­ag­ing the econ­omy even fur­ther. A num­ber of busi­nesses had cut back on in­vest­ing, in part be­cause they were un­sure how Trump planned to pro­ceed with the trade war. Democrats had be­gun at­tack­ing Trump for lack­ing a co­her­ent plan in his ap­proach to deal­ing with the Chi­nese, and the rapid re­ver­sals had caused dra­matic swings in the stock mar­ket.

Sens­ing that Trump’s new de­fi­ance to­ward China could drive up costs, a num­ber of com­pa­nies pe­ti­tioned the White House to ex­empt items they im­port from the new tar­iffs. They ar­gued that these costs would be ei­ther passed along to the con­sumer or threaten the sol­vency of in­di­vid­ual firms.

USTR said the 10 per­cent tar­iff would still go into ef­fect in Septem­ber on some items, in­clud­ing many food prod­ucts, gloves, coats and suits. But it said tar­iffs on other items would be waived com­pletely, “based on health, safety, na­tional se­cu­rity and other fac­tors.”

In a nod to pres­sure from re­li­gious groups and pub­lish­ers, the White House com­pletely ex­empted Bibles and cer­tain other books from new tar­iffs.

Trump, in a Twit­ter post and com­ments to re­porters, sug­gested that the an­nounce­ment was meant as an over­ture to Chi­nese of­fi­cials and an at­tempt to restart the stalled ne­go­ti­a­tions.

“I’m not sure if it was the tar­iffs or the call, but the call was very pro­duc­tive,” Trump said, re­fer­ring to a con­ver­sa­tion this week be­tween top Chi­nese and U.S. ne­go­tia­tors.

But he added a warn­ing on Twit­ter that China needs to buy more from the United States, “As usual, China said they were go­ing to be buy­ing ‘big’ from our great Amer­i­can Farm­ers. So far they have not done what they said. Maybe this will be dif­fer­ent!”

USTR pro­vided a list of prod­ucts that were ex­empted and would face the de­layed tar­iff im­ple­men­ta­tion date, which in­cluded high­chairs, strollers, cell­phones and many toys.

Many busi­nesses had wor­ried that higher tar­iffs on con­sumer goods ahead of the Christ­mas shop­ping sea­son could se­verely dam­age the econ­omy at a time when some are warn­ing that the risk of a re­ces­sion next year has in­creased.

The tar­iff de­lay is likely to keep retail shop­ping strong this year, many econ­o­mists say, but it does noth­ing to al­le­vi­ate the con­fu­sion and un­cer­tainty over what Trump will do next in the trade bat­tle.

“Re­ces­sion risks are el­e­vated,” said Michelle Meyer, head of U.S. eco­nom­ics at Bank of Amer­ica Mer­rill Lynch. “Un­cer­tainty re­mains very high. Un­til there is a clear res­o­lu­tion, which we do not think will come be­fore the end of next year, busi­nesses will re­main cau­tious in re­gards to in­vest­ment.”

Meyer now pre­dicts a 1-in-3 chance of a re­ces­sion in the com­ing year as busi­nesses have al­ready pulled back on spend­ing and are show­ing early signs of slow­ing down hir­ing as well.

The White House list of items that would face im­me­di­ate tar­iffs and de­layed tar­iffs in­cluded many items that ap­peared very sim­i­lar, and White House of­fi­cials did not ex­plain how they de­cided which items to ex­clude and which ones to pe­nal­ize.

For ex­am­ple, cer­tain “men’s or boys’ shirts, of tex­tile ma­te­ri­als” are ex­empted from tar­iffs un­til Dec. 15, but “men’s or boys’ shirts, knit­ted or cro­cheted, of cot­ton,” face tar­iffs in Septem­ber.

Sim­i­larly, recre­ation per­for­mance out­er­wear “bibs and over­alls” are ex­empted from tar­iffs un­til Dec. 15. But nearly four dozen other types of over­alls would face tar­iffs in Septem­ber.

The an­nounce­ment is the lat­est in a herky-jerky trade war be­tween the White House and China. Trump has levied tar­iffs on $250 bil­lion in Chi­nese im­ports, be­gin­ning last year, as he has tried to pres­sure Chi­nese lead­ers to change their trade prac­tices. Chi­nese of­fi­cials have ne­go­ti­ated but re­fused to agree to the terms Trump has de­manded, lead­ing to a pro­longed stand­off.

Trump has fre­quently threat­ened dra­matic penal­ties, how­ever, only to back away. His threat of im­pos­ing a 10 per­cent tar­iff on an ad­di­tional $300 bil­lion in Chi­nese im­ports start­ing next month spooked in­vestors and many law­mak­ers, and it has led to a steady slide in the stock mar­ket in the past two weeks.

“These tar­iffs were Trump’s idea. Now his team is try­ing to clean this up,” said Steve Pavlick, a for­mer Trea­sury Depart­ment of­fi­cial un­der Trump who is now head of pol­icy at Re­nais­sance Macro Re­search. “I don’t think it’s a co­in­ci­dence that you see this right be­fore Christ­mas. They are try­ing to min­i­mize the im­pact.”

Trump has pressed China for months to change its trade prac­tices, call­ing on it to change the way it sub­si­dizes do­mes­tic com­pa­nies, among other things. The White House has also ac­cused China of steal­ing in­tel­lec­tual prop­erty from U.S. com­pa­nies and forc­ing U.S. firms to trans­fer tech­nol­ogy to Chi­nese firms.

But Trump’s de­mands in re­cent weeks have shifted, a sign of the po­lit­i­cal peril that the pro­longed trade war has raised.

Trump had orig­i­nally threat­ened to im­pose the new tar­iffs on $300 bil­lion in con­sumer goods by early July, but at a June meet­ing with Chi­nese Pres­i­dent Xi Jin­ping, Trump agreed to hold off. At the meet­ing, dur­ing the Group of 20 summit in Osaka, Ja­pan, Trump said the Chi­nese had agreed to dra­mat­i­cally in­crease pur­chases of U.S. agri­cul­tural goods, a nod to the farm in­dus­try, which had be­come in­creas­ingly in­censed about be­ing caught in the mid­dle of the trade war.

But Chi­nese of­fi­cials say they never agreed to pur­chase the farm prod­ucts Trump had promised, and that soon be­came clear to the U.S. agri­cul­ture in­dus­try.

Sev­eral weeks ago, the U.S. trade rep­re­sen­ta­tive, Robert E. Lighthizer, and Mnuchin flew to Shang­hai to meet with Chi­nese lead­ers about restart­ing ne­go­ti­a­tions. The dis­cus­sions went poorly, peo­ple briefed on the out­come said.

Trump had re­cently said that the Chi­nese seemed in­tent on wait­ing un­til af­ter the 2020 elec­tion be­fore they would cut a deal with him, and he seemed con­tent with that. But when he heard back from Mnuchin and Lighthizer about how poorly the trip had gone, he an­nounced that he would move ahead with the 10 per­cent tar­iff in Septem­ber.

The trade rep­re­sen­ta­tive’s an­nounce­ment on Tues­day that it would de­lay the im­po­si­tion of those tar­iffs on some of the most pop­u­lar con­sumer goods was the first sign that Trump was back­ing down from that de­mand.


Chi­nese mag­a­zines for sale in Hong Kong fea­ture cov­ers with Pres­i­dent Trump and Chi­nese Pres­i­dent Xi Jin­ping. The Of­fice of the U.S. Trade Rep­re­sen­ta­tive said the 10 per­cent tar­iff would still go into ef­fect in Septem­ber on many food prod­ucts, gloves, coats and suits.

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