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Trump Threatens Higher Tariffs if Phase One Deal with Mainland China Falls Through

President Trump said on 12 November that if the United States and mainland China are unable to finalise the “phase one” trade agreement they are currently negotiating he will “substantially raise” existing import tariffs on mainland Chinese goods. He also warned of similar measures against “other countries that mistreat us.”

In mid-October Trump postponed a planned increase in the Section 301 additional tariff on US$250 billion worth of mainland Chinese goods from 25 percent to 30 percent after announcing an agreement in principle on the first phase of a broader trade deal with mainland China. Both sides have reported progress in recent weeks toward finalising that agreement, and both U.S. and mainland Chinese officials said recently that the United States had agreed to roll back some of its existing tariffs as part of a phase one deal.

Trump subsequently downplayed those reports, saying “I haven’t agreed to anything” but suggesting that “somewhat of a rollback” could be on the table. According to a Reuters article, White House economic adviser Larry Kudlow gave further credence to that idea when he “told CNBC that the phase one agreement could include some adjustments to tariffs already in place.”

In a 12 November speech to the Economic Club of New York, Trump said a “significant phase one trade deal with China … could happen soon.” But he also sought to increase pressure on mainland China by holding out the threat of more tariffs. “If we don’t make a deal, we’re going to substantially raise” tariffs on List 1, 2 and 3 goods, he said. A mainland Chinese government-controlled media outlet responded that “if there’s no rollback of tariffs, there will be no phase 1 deal.”

Trump also used the speech to threaten a substantial tariff increase on “other countries that mistreat us.” While he did not name specific potential targets, elsewhere in his speech he called out the European Union for trade barriers he called “terrible” and “in many ways, worse than China.” However, he also suggested that a potential tariff increase would be imposed through the United States Reciprocal Trade Act, a bill introduced earlier this year that he said would likely only pass Congress if Republicans regain control of the House in the 2020 elections.

Content provided by Picture: HKTDC Research
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