CEOs Trying to Temper Trump Tariffs as U.S.-China Talks Open

(Bloomberg) -- As China prepares to send officials to the U.S. to restart talks on ending an escalating trade war, American companies and trade groups are returning to a Washington hearing room, most to argue against more tariffs from President Donald Trump.

Almost 360 individuals are scheduled to testify over six days of hearings that started Monday on the latest round of proposed actions against Chinese imports, which would place tariffs of as much as 25 percent on $200 billion in goods, according to the U.S. Trade Representative’s office.

At the same time, China plans to send Vice Commerce Minister Wang Shouwen to the U.S. this week to meet with David Malpass, undersecretary for international affairs at the Treasury Department, for the first major trade talks in more than two months.

It’s the third round of hearings on tariffs proposed by the administration. While there’s broad agreement that action is needed to address allegations of Chinese theft of intellectual property and other unfair trade practices, most companies and trade groups have been telling the administration that tariffs aren’t the answer.

Third Trip

Some officials are making their third trip to the nation’s capital to ask that their products be spared from duties. But with Trump threatening to hit virtually all Chinese imports, they’re not overly optimistic about goods being removed from the list.

“It doesn’t give me a whole lot of confidence going into the third round,” said Ed Brzytwa, director of international trade for the American Chemistry Council, which has tried unsuccessfully on behalf of its member companies to have certain products removed. “We have to make our best effort and explain why including these products on the list is not a great idea.”

Stephen Lamar of the American Apparel & Footwear Association spoke on the first panel Monday, warning against the additional tax that U.S. member companies such as those importing diaper bags, fabric and fasteners will face on top of duties they already pay.

“We are truly pleased to see the administration has started a dialogue with China,” Lamar said. “But let’s make sure this dialogue helps, and does not come at the expense of U.S. workers, companies, consumers and communities.”

A National Association for Business Economics survey showed 91 percent of respondents said current tariffs and threats of more to come were having “unfavorable consequential impacts” on the U.S. economy, according to a report released Monday.

Almost 200 individuals testified during the previous two rounds of hearings on duties covering $34 billion of goods imposed on July 6 and another $16 billion in products due to take effect Aug. 23. While some companies want tariffs added to products from competitors, most have asked to have imports spared because comparable items are not made in the U.S. or the higher costs and promised retaliation by China would cause economic harm.

Tariff Damage

The U.S. Chamber of Commerce said in its written comments ahead of this week’s hearings that tariffs won’t effectively address concerns about China’s trade behavior, but the number of objections to the duties “speaks volumes about the damage that additional tariffs will do.”

Some goods, such as shipping containers used by freight companies, were removed when Schneider National Carriers Inc. and other firms testified they are almost exclusively made in China. But most products have remained despite the pleas from companies and trade groups.

The list of $200 billion in targeted items ranges from polymers and raw materials used to manufacture products in the U.S. to finished goods like handbags, ball caps and bicycles. The chemistry council, whose members include DowDupont Inc., said plastics and chemicals account for 25 percent of the more than 6,000 products targeted, and the value of those imports in 2017 was $16.4 billion.

Supply Chains

Duties for the latest round were initially proposed at 10 percent, but Trump directed USTR to consider raising them to 25 percent in response to Chinese retaliation. The tariffs could go into effect after a comment period ends Sept. 6.

SEMI, which represents semiconductor companies and others in the manufacturing supply chain, is also testifying for the third time. It emphasized the cost and time it would take to change suppliers -- as long as 18 months in some cases, which is a generation in the industry, said Jay Chittooran, a public policy manager for the group.

While there’s concern about how much flexibility the administration will have to add and remove products, it’s critical to try, Chittooran said.

“You don’t win the lottery if you don’t buy a ticket,” he said. “If we don’t at least weigh in, we’re definitely not going to get anything taken off.”

Joseph Cohen, chief executive officer of New Jersey-based Snow Joe LLC, successfully argued in May to have electric and cordless snow blowers removed from the tariffs list that became active July 6, and log splitters were also spared from the duties taking effect Aug. 23 after its input.

Power Washers

But Cohen was unable to have garden tillers removed, and the $200 billion list includes the company’s power washers for consumer use -- its largest category, he said. Cohen said he is already in talks with retailers about increasing prices if the tariffs stand, and has put the launch of four new product lines on hold.

Still, Cohen said he is encouraged by the prospect of China and U.S. talking again.

“That’s better than where we were the last three weeks,” he said. “Heck, I’m happy to buy them all lunch, let them all sit down together and come up with something that makes sense.”

©2018 Bloomberg L.P.