Trade War Watch: New Tariffs Coming Down the Pipe After China Pulls U-turn

The United States could impose a 25 percent import tariff on $200 billion worth of Chinese goods by the end of this week — the result of threats issued by President Donald Trump following a reported about-face on the part of Chinese officials negotiating a new trade deal with the U.S.

At the core of the dispute? Intellectual property rights, sources claim.

According to Bloomberg, sources with knowledge of the dispute say U.S. Trade Representative Robert Lighthizer grew angry after Chinese officials said they would not accept a trade deal that required new changes to Chinese law. This is apparently the opposite of their previous stance.

From Bloomberg:

The change has major implications for provisions of the deal aimed at ending a Chinese practice of forcing U.S. companies seeking to do business in the country to reveal proprietary technologies and other intellectual property.

The U.S. side, led by Trade Representative Robert Lighthizer, thought that issues around what’s known as forced technology transfer were resolved and considered the Chinese position on changing its laws to be an attempt to renegotiate, the people said. Lighthizer was angered by the move and briefed Trump.

While the ongoing Chinese sales slump is cutting into automaker profits, most OEMs still see the country as a barely-tapped market capable of lifting their fortunes during a similar slump in the West. Still, handing over sensitive technology to Chinese partners puts OEMs at risk of losing their competitive advantage, should that technology leak out to rivals. There’s a reason why the U.S. wants China to change its laws.

“Over the course of the last week or so we have seen … an erosion in commitments by China,” Lighthizer told media, as reported by Reuters. “That in our view is unacceptable.”

“We’re not breaking off talks at this point. But for now … come Friday there will be tariffs in place,” he added.

The outlet reports that Chinese Vice Premier Liu He is still expected to travel to Washington on Thursday and Friday for talks. Treasury Secretary Steven Mnuchin backed up Lighthizer’s comments, claiming Chinese officials reneged on a deal the two sides expected to close as early as this week.

“They were trying to go back on language that had been previously negotiated, very clear language, that had the potential of changing the deal dramatically,” Mnuchin said. “The entire economic team … are completely unified and recommended to the president to move forward with tariffs if we are not able to conclude a deal by the end of the week.”

The U.S. first raised import tariffs (from 10 to 25 percent) on Chinese goods last July, hitting certain automakers harder than others. Some domestic OEMs applied for exemptions for vehicles and components ( sorry, Tesla), while others switched production locales to avoid steep sticker prices in the vital U.S. market.

[Image: Ford China]