Following President Trump’s announcement of his decision to delay the March 1, 2019 deadline to increase tariffs from 10% to 25% on $200 billion of Chinese goods (i.e., List 3 items), Ambassador Lighthizer testified before the House Ways and Means Committee about the progress that has been made on concluding a binding executive agreement with China.
Some key takeaways from the Ambassador’s testimony are:
1. The negotiations are concerned with settling the section 301 tariffs, which were first imposed in July 2018.
2. An agreement, if reached, would be a binding executive agreement and would not be submitted to Congress for approval.
3. Any agreement will be enforced through a unique mechanism that will require continued and sustained interactions between U.S. and Chinese trade negotiators at three levels to address issues of concern as they arise:
o Monthly meetings will take place at the office director level;
o Quarterly meetings will take place at the Vice-Ministerial level; and
o Bi-annual meetings will take place at the Ministerial level.
4. If issues are not resolved through this process, the United States will be forced to take proportional and unilateral action to address them.
5. Currency manipulation has been a central topic in the negotiations.
6. There has been no agreement to remove the current 10% tariff on $200 billion of Chinese goods, but this is a negotiating objective of the Chinese Government.
7. If the List 3 Section 301 tariffs are indeed raised to 25%, an exclusion process will be established.
8. The Ambassador sees these negotiations as “turning a corner” in the U.S.-China trade relationship, but acknowledges that significant work remains to address U.S. concerns.
Ambassador Lighthizer’s testimony can be characterized as tempered optimism that an enforceable agreement can be completed. He cautioned, however, that even with an agreement the 10% tariffs on List 3 items may not be removed.
Return back to the Trade Monitor for updates on further developments in these negotiations as well as tariffs on List 3 items.