By Josh Zumbrun, Vivian Salama and Alex Leary
WASHINGTON -- The Trump administration abruptly suspended plans
to impose new tariffs on about $156 billion in goods from China,
saying the move was driven by concerns about the impact an
escalating trade fight would have on businesses and consumers ahead
of the holiday shopping season.
The shift fueled a rally on Wall Street, sending the Dow Jones
Industrial Average up 1.44% to 26279.91. But it wasn't immediately
clear if the retreat marked a significant step toward resolving the
more than yearlong trade conflict between the U.S. and China.
Under the reprieve, the U.S. agreed to postpone until Dec. 15
tariffs of 10% on smartphones, laptops, toys, videogames and other
products that were set to take effect on Sept. 1. The value of
those goods imported in 2018 was about $156 billion, according to a
Wall Street Journal analysis.
Tariffs on other items, including tools, apparel items and some
footwear, will still go into effect on Sept. 1. Those goods had a
value of about $107 billion last year, according to the analysis.
The U.S. said tariffs on some products, such as bibles and shipping
containers, would be removed from the tariff lists entirely.
"We're doing this for Christmas season, just in case some of the
tariffs would have an impact on U.S. customers," Mr. Trump told
reporters on Tuesday.
But there were other influential factors, according to officials
familiar with the decision, including the recent volatility in the
stock market as trade tensions escalated this month. Before
Tuesday, the DJIA had fallen by more than 1000 points since the
disappointing trade talks in Shanghai in late July.
One official involved in the talks said U.S. importers
complained they had already locked in purchases for seasonal goods
from China, and would have to swallow the cost of tariffs or pass
them on to customers. Another senior administration official made
the same point, and said the reprieve shouldn't be seen as an olive
branch toward Beijing.
The U.S. is preparing to host China for face-to-face talks in
Washington next month, that official said. But "these discussions
aren't going to go anywhere" if China continues to resist
structural changes to ensure fair competition for U.S. businesses,
the official said.
The decision to suspend the tariffs came after a conference call
between U.S. and Chinese negotiators, including Chinese Vice
Premier Liu He, U.S. Trade Representative Robert Lighthizer and
U.S. Treasury Secretary Steven Mnuchin.
According to a statement from China's Commerce Ministry, the
call was initiated by the U.S. and the two sides agreed to meet by
phone again in two weeks. The Commerce Ministry statement made no
mention of plans for face-to-face talks.
Trade talks have been on a roller coaster since late May, when
negotiations broke down. The U.S. said China backed down on a
pledge to make structural changes, such as legal measures to
protect intellectual property, while Beijing said it wanted the
U.S. to remove existing tariffs before committing to an accord.
In recent weeks, negotiators have been working on a more limited
deal that would have China agreeing to buy more U.S. farm products
and the U.S. agreeing to ease off restrictions on China's Huawei
Telecommunications Co.
In Shanghai last month, however, negotiators failed to conclude
even a partial deal. That prompted Mr. Trump on Aug. 1 to threaten
a new round of tariffs, followed by Beijing's decision to let its
currency depreciate in value, which makes its exports less
expensive, and to suspend purchases of U.S. farm products.
Mr. Trump's senior advisers, with the exception of trade adviser
Peter Navarro, had all counseled the president against escalating
the tariffs.
Many business groups and lawmakers remain critical of Mr.
Trump's tariffs and the whiplash resulting from U.S.-China trade
relations lurching between reprieves and escalations.
Democratic Sen. Ron Wyden of Oregon called Mr. Trump's tariff
policy incoherent, and said it was "hitting American pocketbooks
without changing China's behavior."
Gary Shapiro, the chief executive of the Consumer Technology
Association, said his group appreciated the administration's
decision to delay some tariffs. "But the uncertainty and volatility
of policy based on tariffs is bad for American businesses and is
bad for workers, families and the U.S. economy," Mr. Shapiro
said.
Myron Brilliant, the head of international affairs at the U.S.
Chamber of Commerce, which has fought the Trump administration on
tariffs, said the U.S. pullback increases chances that a limited
deal could be reached on U.S. farm products and Huawei. "It gives
both sides more breathing room," Mr. Brilliant said, "as they look
to get back on track."
Hopes that China could resume buying U.S. crops boosted shares
of ethanol makers such as Green Plains Inc., which had banked
heavily on Chinese demand for the corn-based fuel additive. Its
shares were up nearly 5%.
Apple Inc. also saw shares rise more than 4%, since the decision
means its iPhones made in China will be spared tariffs until at
least December. Apple was among the companies that registered
official complaints against the tariffs.
The U.S. currently imposes tariffs of 25% on Chinese imports,
largely on items used by businesses. Mr. Trump has characterized
those tariffs as a penalty on China, but they are paid by importers
in the U.S.
The new tariffs, which are now being scaled back, have been
described by the Trump administration as affecting about $300
billion in goods. But actual trade in 2018 in the items affected by
the tariffs was somewhat lower -- closer to $262 billion --
according to Wall Street Journal calculations.
Not all consumer items will avoid the tariffs until December. In
many categories of goods, some items will avoid higher duties while
others won't. For example, tariffs on about $13.7 billion of
fabrics and apparel were postponed until the end of the year, but
tariffs will still move forward on about $39 billion of such
items.
Tariffs will be postponed for about $22 billion of toys, games
and sports equipment until December, but still hit about $5 billion
of such items in September.
--Anthony DeBarros contributed to this article.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com, Vivian Salama at
vivian.salama@wsj.com and Alex Leary at alex.leary@wsj.com
(END) Dow Jones Newswires
August 13, 2019 17:58 ET (21:58 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.