Mara Lee

The U.S. has asked China to reduce the bilateral trade deficit by $200 billion by the end of 2020, according to an eight-point list of demands that leaked to journalists during two days of trade talks in Beijing. The Wall Street Journal has reported that in addition to expected positions on intellectual property, investment barriers in China, forced tech transfer, and subsidies to high-tech firms, the document also asked China to agree not to retaliate against U.S. farmers.

President Donald Trump's proclamations on the latest extensions to country exemptions on the Section 232 tariffs (see 1804300064) will be published in the Federal Register on May 7. The proclamations on steel and on aluminum say that while Canada, Mexico and the European Union face a June 1 deadline to agree to "satisfactory alternative means" to ameliorate the national security threat their imports cause, Australia, Brazil and Argentina do not have an expiration date on their exemptions. The president said since those countries have reached agreements in principle, he didn't think a deadline was necessary. But if those agreements are not finalized promptly, he reserves the right to impose tariffs.

More than 1,100 economists signed a letter to Congress and the president asking the government not to make the same mistake it did in 1930, when Congress passed the Smoot-Hawley Tariff Act. The letter, published May 3, said trade is significantly more important than it was in 1930, but that the fundamental economic principles that argue against tariffs have not changed in the nearly 90 years since then. The letter quotes a 1930 letter, signed by 1,028 economists, that asked Congress to reject Smoot-Hawley. Tariffs "would raise the cost of living and injure the great majority of our citizens," the original letter said. Exporters would also suffer from retaliatory tariffs. The signatories include economists from the left, right and center, and 15 Nobel Prize winners.

When Trump administration officials are in Beijing this week, there is going to be "a lot of stuff that's getting thrown at the wall," according to Evan Feigenbaum, vice chairman of the Paulson Institute at the University of Chicago. Feigenbaum, speaking on a panel about China's policies, said the Trump administration is complaining about bilateral deficits, intellectual property theft, Made in China 2025, non-tariff trade barriers and Chinese state-run firms buying U.S. tech companies. While most of the issues underlined in the Section 301 investigation are in the non-tariff trade barriers and IP theft areas, experts at the Washington International Trade Association event disagreed on whether President Donald Trump would declare victory after only a pledge to reduce the bilateral trade deficit.

Argentina and Brazil recently agreed to deals resulting in permanent exemptions from Section 232 tariffs on iron and steel products and aluminum products. Argentina will be exempt from tariffs on both aluminum and steel after agreeing to new quotas on each. Brazil, on the other hand, remains subject to 10% aluminum tariffs after rejecting quantitative restrictions, though it will get an exemption from the 25% tariff on steel.

Because the U.S. has stepped away from a leadership role in free trade, Japan has had to step in, Japanese politicians told an audience at the Brookings Institution. That's why it worked to save the Trans-Pacific Partnership after the Trump administration pulled out. Politicians and experts speaking on the panel on the future of U.S.-Japan trade said the TPP would have been more effective for dealing with China's intellectual property rights violations than the course the U.S. is on now.

Mexico's auto industry is against the U.S. proposal to require higher-wage work as part of the NAFTA rules of origin that make it possible for Canadian and Mexican assembly plants to sell cars into the U.S. duty free. The Wall Street Journal recently quoted the head of the Mexican auto parts manufacturers' trade group, Eduardo Solis: "'The U.S. proposal isn’t acceptable. The percentage, the transitions, the restrictions. You have to understand the U.S. proposal is like putting padlocks on padlocks,' Mr. Solis said of the two-layered rule of origin. 'Imagine a car that does comply with the percentage, but doesn’t comply with all the core parts. Or you comply with core parts but don’t meet the steel and aluminum requirements. Or you comply with the first three but you don’t meet the wage requirements.'"

U.S. Trade Representative Robert Lighthizer said it will be very difficult to get China to change the policies that are the reasons the U.S. opened the Section 301 investigation. "I am always hoping, but not always hopeful," he said to a U.S. Chamber of Commerce audience two days before he leaves for negotiations in Beijing.

Extended exemptions from Section 232 tariffs on aluminum and steel left some countries and importers relieved, but others uncertain as to what is around the corner on June 1. Announced the evening of April 30 just hours before the deadline, the proclamations on steel and aluminum announce full, if undefined, exemptions for Argentina, Brazil and Australia, the final details of a steel exemption for South Korea, and a delay until the beginning of June 1 for Canada, Mexico and the European Union.

The U.S. appealed the World Trade Organization's compliance panel decision that said the U.S. had to change its countervailing duties on oil country tubular goods, solar panels, pressure pipe and line pipe. The CVD cases were brought between 2007 and 2012. The core issue in the case is whether the Commerce Department properly described the government's intervention in Chinese firms that made those products when it targeted them for trade remedies. The appeal was published at the WTO on April 30.