While many American officials are eager to avoid the new tariffs, the president could go either way.

By Ana Swanson, Alan Rappeport and Keith Bradsher
Published Dec. 10, 2019 / Updated Dec. 13, 2019

New tariffs on over $100 billion of Chinese goods are due to take effect on Sunday, but the Trump administration is sending mixed signals on delaying them as the United States and China keep haggling over a trade deal.

American officials have recently hinted in public remarks that President Trump could pause the new tariffs, which, if imposed, would expand American taxes to nearly every product imported from China. While many American officials are eager to avoid the tariffs, people with knowledge of the deliberations said that no decision had been made and that the president could go either way when he meets with advisers this week.

The United States and China announced in mid-October that they had reached a so-called Phase 1 trade agreement that would allow Chinese purchases of American agricultural goods to resume while the United States would cancel additional tariffs scheduled for Oct. 15. American officials said that future tariff increases could also be avoided if the pact were signed.

Since then, negotiators have continued to grapple over the deal’s terms. The two sides remain divided over how many of Mr. Trump’s tariffs will be canceled in return for China’s trade concessions, and over the terms that will govern Chinese purchases of tens of billions of dollars of American agricultural products.

A completed deal appears unlikely before Mr. Trump’s next scheduled tariff increase, set for 12:01 a.m. on Dec. 15. The move would place a 15 percent tariff on $160 billion of products, including toys, smartphones and other electronics, weighing on consumers and potentially turning into a political liability for a president headed into a re-election campaign. Business groups are worried about further levies.

“We’re still in a high-stakes poker game,” said Myron Brilliant, the executive vice president at the U.S. Chamber of Commerce.

“Having another round of tariffs would be a poison pill in the context of the current U.S.-China negotiations, and in the context of the global economy,” Mr. Brilliant added. “We hope both sides understand the urgency of getting an agreement finalized as soon as possible.”

If Mr. Trump delays those tariffs to allow more time for negotiations, it would be the fifth time this year that he has delayed or canceled tariffs. That could prompt criticism that China is taking advantage of the negotiating process.

With pressure growing, administration officials have weighed a variety of options. Michael Pillsbury, a Hudson Institute scholar who advises Mr. Trump, drafted a memo that has been circulated to the White House outlining possible actions.

The memo, which was reviewed by The New York Times, included options like extending the deadline with a commitment to hold additional talks. A more aggressive approach would entail Mr. Trump ratcheting tariff rates higher, perhaps beyond 50 percent, and refusing to soften on any of his original demands.

The significant progress this week on moving Mr. Trump’s revised North American trade deal toward a vote in Congress appears to have further slowed progress toward a resolution by diverting the administration’s attention away from China.

As the deadline nears, the December tariffs’ fate has grown particularly cloudy. Some say that China has tried to appeal to Mr. Trump’s desire to see more farm purchases by offering a waiver on tariffs it had placed on American soybeans, a move that prompted Chinese companies to make large bulk purchases of American goods.

Sonny Perdue, the agriculture secretary, said this week during a trip to Indiana that he did not expect the new tariffs would be imposed.

“I think we may see some backing away,” Mr. Perdue said, according to Bloomberg News. “I don’t think the president wants to implement these new tariffs but there’s got to be some movement on their part to encourage him not to do that and hopefully the signal that they sent over soy and pork reduction might be that signal.”

Last week, Treasury Secretary Steven Mnuchin said that the two sides were in constant contact and that an agreement should not be sidetracked by an “arbitrary” deadline.

But other officials were careful not to lift the threat just yet.

“Those tariffs are still on the table,” Larry Kudlow, the chairman of the National Economic Council, said at a WSJ CEO Council event on Tuesday, adding that he did not want to sound pessimistic about a deal.

Speaking at the same gathering on Monday, Jared Kushner, a close adviser to the president, said that he did not know what decision Mr. Trump would make but that the talks were “heading in a good direction.” Mr. Kushner has recently taken a more prominent role in the talks, offering to try to find common ground between the Chinese negotiators and his father-in-law.

Since Mr. Trump announced that he reached a deal in October, China has pushed for the United States to roll back tariffs it has placed on $360 billion worth of goods. Negotiations have centered on whether the United States would lift the tariffs it has imposed since September, or whether it might slash the overall rate for all or some of the tariffs in effect — for example reducing the existing tax on China by half.

Critics have said that the Phase 1 deal may only temporarily calm relations since it would do little to address America’s longer-term concerns about China’s economic practices.

The preliminary deal promises to lock in Chinese purchases of American agriculture goods, open Chinese financial markets to American companies and strengthen China’s protections for intellectual property. But analysts say it appears to secure only limited protections against China’s practices of coercing technology away from the United States, and does nothing to stop China’s pattern of heavily subsidizing its industries.

In a series of interviews in Beijing on Tuesday, people familiar with China’s trade policies said that the Chinese government had discernibly hardened its negotiating positions since Mr. Trump and Vice Premier Liu He reached their agreement in October.

The Phase 1 agreement attracted criticism from the more nationalistic wing of the Chinese government because it called for Beijing to resume buying American farm goods in exchange for the United States not raising tariffs further, but without any American pledge to roll back some of the tariffs already imposed. Any tariff cuts were left for later phases, an arrangement that was assailed in China as too favorable to the United States.

Since early November, Chinese negotiators have demanded that a Phase 1 deal include some tariff relief.

“They believe this will make the deal equal — otherwise it will be one-sided,” said Professor Tu Xinquan, the executive dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing. The trade ministry founded the university and retains close links to it.

Deferring rollbacks to a Phase 2 or subsequent agreement is being resisted by Chinese negotiators, Mr. Tu said, adding that, “they want every agreement to be equal.”

But China has been wary of offering further concessions to offset a tariff rollback. That has stymied negotiators at least temporarily.

American officials say that they are still waiting for China to signal its willingness to make the necessary concessions to seal a deal.

Clete Willems, a partner at Akin Gump who left the White House this year, said China appeared to be taking actions, like the soybean purchases, to persuade the administration to delay the tariffs as both sides work toward a deal.

“The president has a decision to make,” Mr. Willems said, “and realistically he could still go both ways.”

Correction: Dec. 11, 2019
An earlier version of this story gave an incorrect figure for the tariff rate that President Trump will impose on $160 billion worth of Chinese goods on Dec. 15. He has threatened to impose a 15 percent tariff, not a 10 percent one.

Source: https://www.nytimes.com/2019/12/10/business/china-tariffs-december.html