Yahoo Finance China summit: The Trump tariffs remain firmly in place after another Biden/Xi meeting
The highly anticipated summit this week between US President Joe Biden and Chinese President Xi Jinping delivered news on issues ranging from military communications to fentanyl. But another topic was almost completely avoided even with a key deadline looming in just about six weeks: the Trump-era tariffs on a range of Chinese goods.
In fact, the word "tariff" didn't appear at all in the official transcript of President Biden's press conference following the meeting — or in the official White House summary of the four-hour meeting.
Trade issues more broadly only earned a glancing mention following the sit-down with a note that Biden "raised continued concerns about the PRC's unfair trade policies." During a follow-up speech before CEOs Thursday, Biden only briefly mentioned trade issues and instead focused most of his time on his overall economic record and what he described as his administration's work across the Asia-Pacific region.
But Biden and his team will still need to wrestle with the trade issue in the coming weeks before an end-of-year deadline to complete a four-year review of the so-called Section 301 tariffs that then-President Trump imposed on China in 2018.
The bottom line, according to experts: It's likely that those controversial duties will simply be extended as-is — with the prospects for change even dimmer in 2024 given the election season.
"Ever since Biden was elected, the trade community had hoped for a reversal of the Trump-era trade tariffs," said Ashley Craig, a D.C.-based international trade lawyer at Venable LLP, in an interview this week.
But his prediction for 2024 is that "the president's not going to substantially modify the current status on US-Sino trade relations going into next year and the election; that's just not going to work with his base."
The pessimistic outlook was echoed elsewhere with Nick Marro, a lead for global trade at The Economist Intelligence Unit, saying any moves could be in the opposite direction. "Our own base case is that the US will tighten many of its trade and investment restrictions on China in the coming years," he wrote in a recent note, adding that election year pressures will push Biden to be tougher on China.
That "could end up plunging US-China ties back into a state of volatility," said Marro.
The Biden administration's view
Many in the business community have long advocated for a loosening of these trade restrictions, noting that US companies pay these tariffs — not China's government. But the Biden administration contends that the tariffs are interlinked with an array of other complicated issues unlikely to be resolved soon.
Ahead of this week's meeting, a senior Biden official lumped in trade with issues like human rights and the territorial claims over the South China sea as "issues where we have differences." The official signaled that movement on trade would likely be contingent on China being more friendly to American companies around issues such as forced technology transfers and Chinese state controls, which Xi doesn't appear likely to move away from anytime soon.
But trade was brought up directly in one notable venue this week: a dinner Wednesday night with American CEOs.
Just moments before the Chinese president himself spoke — as CEOs like Tim Cook of Apple (AAPL) and Marc Benioff of Salesforce (CRM) looked on — US Commerce Secretary Gina Raimondo echoed the administration trade position saying she is in favor of more trade, but only "on a level playing field that is reciprocal and that is fair."
Xi has long criticized US trade policy and export controls, telling Biden from across the negotiating table Wednesday that it was a grave problem that "protectionism is rising," according to an official translation. But he largely choose to strike an optimistic tone in most of his public comments.
In his own speech before the assembled CEOs Wednesday night, Xi focused more on building bridges between the US and China. He even suggested that Chinese pandas could be coming back to the National Zoo in Washington, D.C., after the former residents were recalled to the PRC earlier this year.
Where things go from here
Panda diplomacy aside, this week's lack of trade news likely means that the Trump-era tariffs will continue.
"We expect the Biden administration will announce the extension of most of the 2018 tariffs on Chinese imports," Stifel's chief Washington policy strategist, Brian Gardner, wrote to clients. He also said he was concerned that new export restrictions on chips used in artificial intelligence could also be in the offing.
The question is whether this week's happy talk in other areas could lower the chances of escalation on the trade front. Not likely is the answer from many observers, who note that potential flashpoints from both coming elections in Taiwan as well as voting in the US could rachet up tensions in the months ahead.
In any case, the business world has largely adapted to the tariffs, said Craig, the trade lawyer.
"Keep in mind that even though the trade community despises the 301 structure, we are now years deep into it and most, if not all, US companies have pivoted," he noted this week. Craig works with many ocean shippers who feel the tariffs most directly but he notes that companies long ago took measures to minimize, or at least factor in, the increased costs.
Asked what companies are expecting from Washington, he added, "Our clients are not really holding their breath."
Ben Werschkul is Washington correspondent for Yahoo Finance.
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