Tariff-Hike Delay Needs ‘Presidential Proclamation’ to Avert Automatic Increase, Says Expert

The duties are “scheduled to go up automatically” in the wee hours of Saturday morning, “based on a prior proclamation” imposing a 90-day postponement that kept the higher tariffs from taking effect Jan. 1 (see 1812140045), said Murphy. “I do not believe that can be canceled by tweet,” he said. “My guess is that they are working on the delay language, as we speak.” The Office of the U.S. Trade Representative didn’t comment Tuesday.

It bears watching how “enforcement mechanisms” written into a trade deal with China might impact the tariffs, blogged Murphy Tuesday. If the U.S., were to agree to suspend the duties as part of the trade agreement, but maintain the right to “re-impose” them “if China fails to live up to its commitments,” that would “create significant uncertainty for U.S. businesses” in their "sourcing/investment decisions,” he said: “If duties of 25% could be imposed on the articles you purchase from a given country with little-to-no advance notice, would you continue sourcing from there, or would you look to eliminate that risk by sourcing from elsewhere?”

Other trade experts we canvassed about a possible China deal were skeptical Trump will get everything he asked for in the negotiations. "The president, for all his self-proclaimed negotiating prowess, really seems to have negotiated himself into a corner on this," said Phil Levy, senior fellow on the global economy at the Chicago Council on Global Affairs. "He escalated way too fast with the tariffs. He honestly believed if he threw around really big numbers the Chinese would cave. They did not. He got stuck with some threats that he didn’t really want to carry out."

Levy said advisers are telling Trump that hiking tariffs to 25 percent on $200 billion in imports from China would cause a recession. "We’ve now made threats that are not credible," he said. "The Chinese watching this have to conclude, why should they do anything uncomfortable?"

Edward Alden, an international business professor at Western Washington University, doesn't think the deal can be concluded without at least lifting the 10 percent tariffs on the largest tranche of Chinese imports. "It's hard for me to imagine that the Chinese would make a set of serious commitments unless some or all of the U.S. tariffs are removed," he said. He envisions a scenario in which the U.S. would keep in place the 25 percent tariffs on $50 billion in imports, with the understanding they could be lifted later if China keeps its promises to overhaul its allegedly unfair trade practices.

Derek Scissors, American Enterprise Institute resident scholar, thinks the administration isn't negotiating with the Chinese about lifting the 25 percent tariffs on $50 billion in imports, only the 10 percent duties on the third tranche of $200 billion. It has been obvious to him since November that the administration lacked the political will to ratchet up the tariffs on the largest bucket of imports.

Scissors discounted speculation Trump will concede too much to the Chinese to secure a trade deal, because if he were, China would be rushing to get it signed. But he expects any agreement to be “an empty, fraudulent deal" that won’t bring about structural changes in China’s bad behavior, he said. "We’re asking the Chinese for difficult sweeping, controversial changes in their practices. We don’t have an enforcement mechanism."

Any deal that lifts all the tariffs "leaves the U.S. in a considerably worse position” than before, said Western Washington’s Alden. “At that point, we will have used what is the most aggressive strategy the United States is willing to use, and get little to nothing for it."