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No Movement on U.S.-China Negotiations

08/09/2018

Despite the urging of prominent economists and business leaders including former Treasury Secretary Hank Paulson and Stephen Schwarzman CEO of Blackstone, formal talks between the U.S. and China over ongoing trade disputes have not been scheduled.  Previously the negotiator for China, Liu He had offered to increase imports from the U.S. by $70 billion in an attempt to reduce the negative $200 billion trade deficit.  Informally Treasury Secretary Stephen Mnuchin and Liu He have discussed possible solutions but formal talks have not been scheduled.

 

The American negotiating position has been strengthened by agreements with the European Union which has similar problems with aggressive business practices and coercive tactics imposed by China.

 

Led by trade hawks including U.S. Trade Representative Robert Lighthizer and Advisor Dr. Peter Navarro the U.S. has imposed a sequential series of tariffs on Chinese imports.  Currently there is a 25 percent levy on imports valued at $34 billion to be followed by an additional $16 billion before mid-August.  The Administration has proposed a 10 percent tariff on products with a value of $200 billion imported from China and the President has threatened to double down to include all $505 billion in imports.  In this event, retaliatory tariffs could impact growth of world income and have severe socio-political repercussions in the U.S.

 

It is hoped that diplomacy will prevail and that equitable solutions will be devised.  Simply assigning $12 billion as a “short-term” reimbursement to placate farmers will be insufficient to restore their profitability.  The law of unintended consequences is in clear evidence with U.S. manufacturers suffering from increased prices of steel and aluminum whether imported or domestic.  Ultimately if the economy slows down, the effect will be felt by all sectors of the poultry industry with lowered spending initially in restaurants and then for home preparation and consumption.