The US-EU-China Trade Triangle: US Tariffs on China Effective Only If Disputes With EU Resolved

Written by | Thursday, August 2nd, 2018

US President Donald Trump wants to put more pressure on China by imposing a higher 25 percent tariff on $200 billion worth of Chinese imports, Washington commented. US Trade Representative Robert Lighthizer explained that the new tariff would follow Beijing’s refusal to meet US demands. “The increase in the possible rate of the additional duty is intended to provide the administration with additional options to encourage China to change its harmful policies and behavior and adopt policies that will lead to fairer markets and prosperity for all of our citizens,” Mr. Lighthizer said in a statement.

Washington and Beijing have not had any formal talks on China making changes to its intellectual property protection, technology transfers and subsidies for high technology industries. The White House sources commented that President Trump remained prepared to keeping communication channels with Beijing open to see whether a “fruitful negotiation” is possible.  According to Derek Scissors of the Washington-based American Enterprise Institute, a 25 percent tariff rate could shut out Chinese products and shift American supply chains to other countries, as a 10 percent duty could be offset by government subsidies and weakness in the yuan.

Mr. Scissor also added the strategy would only be meaningful if the US administration resolves trade disputes with US allies such as the European Union. This move comes after the Trump cabinet found some common ground with Brussels following the official visit of EU Commission President Jean-Claude Juncker. However, this unwritten agreement includes the expectation of the US President that the EU would fund 9 to 11 liquefied natural gas (LNG) ports to absorb “vastly” more shipments from the United States.

Yet, current EU investment in new projects will only help open minor markets. In a Washington press conference with Italian Prime Minister Giuseppe Conte earlier this week, Donald Trump said that part of the US-EU trade talks sought to expand America’s reach into the Europe’s gas markets, which were catered by the Russians. “And we are already talking to the European Union about building anywhere from 9 to 11 ports, which they will pay for, so that we can ship our LNG over to various parts of Europe,” he said.

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