- Trade experts say reduction will probably apply only to goods from countries with Most Favoured Nation status
- Business groups and chief executives apply pressure for a tariff reprieve amid coronavirus-related shutdowns
The Trump administration faces growing pressure from hard-hit US companies to delay collecting tariffs on imported goods as efforts to stem the coronavirus send the economy into a tailspin.
But the anticipated move is not expected to apply to some US$360 billion in Chinese imports subject to tariffs as high as 25 per cent as administration hardliners push to maintain pressure on Beijing.
"The administration remains steadfast in its opposition to reducing those specific tariffs" on China trade, said Henrietta Treyz, economic policy director with Veda Partners. "Instead, they'll be reducing some more rudimentary and perpetual tariffs on nations around the globe."
On Wednesday, the 300,000-member US Chamber of Commerce weighed in a day after 400 chief executives urged US President Donald Trump to hold off collecting tariffs for up to six months given pandemic-related shutdowns.
"Tariff relief would provide some welcome breathing room for American businesses and consumers," Myron Brilliant, the business group's head of international affairs, said in a statement. "Liquidity has emerged as one of the top challenges for businesses of all sizes."
With more than 30 American states imposing stay-at-home orders to stem the pandemic, unemployment has soared, economic activity cratered and the almighty American consumer has gone into hibernation. Supporters of a temporary tariff reprieve view it as a way to bolster cash flow for desperate companies and otherwise stimulate the broader economy.
Brilliant said that tariff relief would complement tax measures included in last week's massive US$2 trillion stimulus bill, helping to alleviate some of the strain companies are facing.
The president has been coy when asked about the tariff issue. "Well, that might be, but I'm going to have to approve the plan," Trump said on Tuesday in response to a reporter's question. "But one thing I will tell you, I approve everything and they haven't presented it to me."
"There's nothing wrong with doing it, but we'll let you know," he added.
Coronavirus 'biggest test' yet for Donald Trump and US-China relations
Washington trade experts say they expect any such move to include a 90-day tariff reprieve on goods such as shoes and apparel imported from America's closest trading partners subject to low duties under so-called Most Favoured Nation (MFN) status. But it would not extend to steel and aluminium imports subject to national security protections or to goods that fall under anti-dumping provisions.
They add that they see little sign Trump will extend the reprieve, which would come by executive order, to huge volumes of imports from China subject to so-called Section 301 punitive tariffs. Many US companies have applied, with mixed success, for temporary exclusions from 301 duties, which are as high as 25 per cent on some US$250 billion in Chinese goods. But most of those exclusions are set to expire soon.
Another US$120 billion worth of Chinese imports face tariffs of 7.5 per cent, down from 15 per cent, under terms hammered out during a phase one trade deal agreed to in mid-December.
The US Chamber on Wednesday urged Trump and the Office of the US Trade Representative (USTR) to extend the tariff reprieve to Chinese imports as well. "The last thing any business needs at this time is a tax increase, which is exactly what the expiry of these exclusions would amount to," Brilliant said.
Analysts said the administration has political and ideological interests in maintaining pressure on China. Trump sees his hardline policies and the phase one deal as important accomplishments he can point to during his re-election campaign leading up to November's vote. And he is often influenced by his top trade adviser, Peter Navarro, the author of Death By China and The Coming China Wars who has long espoused hard-line views toward Beijing.
"Tariff reduction or even just deferred payment on those imposed on China has been explicitly rejected," said Derek Scissors, an analyst with the conservative American Enterprise Institute. "It would be a tough thing for the president to try to justify politically, and this is still an election year."
Trump facing opposition as US considers three-month import duty delay
Analysts questioned how much the expected tariff relief would help the US economy given that imports from MFN countries are already subject to very low duties. Chinese goods subject to high US tariffs, meanwhile, account for more than 12 per cent of total US imports. A temporary reprieve for MFN goods would have a "relatively small impact" in stimulating the US economy, said Terry Haines, founder of Pangaea Policy, a financial newsletter.
In their letter on Tuesday, the 400 chief executives said delaying duties was "critically important during a prolonged period of little to no revenue," adding that such a move would not alter trade flows since "the money is still due".
Trump's expected move is an attempt to balance his hardline approach toward China and domestic calls to reduce the burden that tariffs represent for US companies.
"What this shows, the administration is seriously look at providing tariff relief, but there are differing views on how best to do this," said Wendy Cutler, managing director of the Asia Society Policy Institute and a former senior USTR negotiator. "It looks like they're trying to split the difference, providing some tariff relief while keep some in place that have been the cornerstone of administration policies."
Trump also sees China as a useful scapegoat to rile up his voting base and deflect attention from his poor crisis management amid the pandemic, marked by a long delays in recognising the danger and in the deployment of much-needed medical resources, analysts said.
In recent weeks, the Trump administration has expelled US-based Chinese employees from Chinese state media, prompting Beijing to kick out American reporters from The Wall Street Journal, New York Times and Washington Post.
Trump has also referred repeatedly to the "Chinese flu", echoed by Secretary of State Mike Pompeo's calling it the "Wuhan virus" " an implicit message that "China started it".
Trump turns combative during stormy coronavirus press conference
A call late last month between President Xi Jinping and Trump seemed to ease tensions temporarily.
"It seems that neither the US nor China is willing to stop the scapegoating," said Bonnie Glaser, director of the China Power Project at the Centre for Strategic and International Studies. "If a truce was called after the Xi-Trump phone call, it didn't hold."
But, she added, "a broader effort is certainly underway in the US to gather evidence to prove that patient zero was in China and China covered up crucial information about the virus, which had devastating impacts on other countries."
In a CNN interview on Wednesday, US Vice-President Mike Pence denied that Trump had played down the coronavirus threat, despite Trump's repeatedly saying in January and February that the disease was "under control" and presented little more risk than the seasonal flu.
The US would have been "better off" in its response, Pence said, if China had been more forthcoming with information about the coronavirus.
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