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US wraps up hearings on plan to hit all Chinese goods with tariffs as trade war nears first anniversary

Owen Churchill, US correspondent

US government hearings on proposed new tariffs on around US$300 billion of Chinese goods came to a close on Tuesday, after seven days of testimony by hundreds of companies and industry associations seeking shelter from the costs of the countries' escalating trade war.

The hearings wrapped up in Washington just days before US President Donald Trump and his Chinese counterpart Xi Jinping are to meet in Japan on Saturday in a bid to get trade talks back on track after a six-week impasse.

With the trade conflict set to pass the one-year mark on July 6, Trump has threatened to slap 25 per cent duties on the remaining untaxed Chinese goods, should the discussions go poorly.

Over 300 representatives from industries that would be hit by such tariff action have testified before an inter-agency committee over the past week, while close to 3,000 additional written comments have been filed to the office of the US Trade Representative (USTR) from companies including Apple, Fitbit and Keurig Dr Pepper.

They said, however, that the use of tariffs is costing American jobs, raising prices for consumers and, in some cases, posing a national security risk.

The committee will accept written responses and rebuttals from companies until July 2, then deliver its recommendations on possible exemptions to the USTR.

The trade war has ruptured global supply chains, plunged US soybean futures to their lowest point in a decade and led to higher costs for US importers.

"China doesn't pay the tariffs," Nate Herman, director of government relations at the Travel Goods Association (TGA), said on Tuesday during his testimony. "We do."

TGA estimates that the third tranche of tariffs on US$200 billion of Chinese imports cost the travel goods industry an additional US$288 million over seven months.

One member company had exhausted its line of credit to pay those tariffs upon the goods' entry into the US, Herman said in an interview on the sidelines of the hearing.

A fourth and final tranche, which would cover the remaining untaxed items in the travel goods sector, would "only put the remaining nails in the coffin for our industry", Herman told the panel.

In a recent letter to the USTR opposing the tariff action, Apple highlighted its pledge to invest US$350 billion in the US economy over five years and said tariff action on the company's products "would result in a reduction of Apple's US economic contribution".

Wearable technology maker Fitbit, whose fitness trackers are assembled in China, argued that further tariffs posed not just a financial burden to Americans but also a national security risk to the US.*

In its written testimony, the company said putting tariffs on fitness trackers and smartwatches would give Chinese competitors such as Huawei and Xiaomi a competitive edge in the US market.

That change would place "sensitive US health, location and financial data within the Chinese government's reach", said the company, whose stock trades on the New York Stock Exchange.

Testifying on Tuesday, Fitbit executive vice-president Andy Missan said that absorbing the costs of more duties in the short term was out of the question.

"It would take many years and millions of dollars to replicate what we've found in China, which has developed over 40 years these very high precision, small form factor processes that, frankly, coupled with the labour costs, just don't exist elsewhere in the world," Missan said.

US President Donald Trump talks to Apple CEO Tim Cook during a meeting of the American Workforce Policy Advisory Board in May. In a letter to the US trade representative's office, the technology company said new US tariff action "would result in a reduction of Apple's US economic contribution". Photo: AP alt=US President Donald Trump talks to Apple CEO Tim Cook during a meeting of the American Workforce Policy Advisory Board in May. In a letter to the US trade representative's office, the technology company said new US tariff action "would result in a reduction of Apple's US economic contribution". Photo: AP

The question of tariffs will be looming large this weekend when Trump and Xi meet in Japan on the sidelines of the G20 summit, with the US administration having threatened repeatedly that it would go ahead with the fourth tranche of duties should the talks not yield progress.

Trump would be happy with any result of the upcoming parley with Xi, including a decision to escalate tariffs, a senior US administration official said on Monday.

"The US economy is stronger than it's been in many, many decades, so he's quite comfortable with his vision going into this meeting," the official said. "The president is quite comfortable with any outcome."

Wearable technology maker Fitbit, whose fitness trackers are assembled in China, argued that further tariffs posed a national security risk to the US. Photo: Handout alt=Wearable technology maker Fitbit, whose fitness trackers are assembled in China, argued that further tariffs posed a national security risk to the US. Photo: Handout

In the event that Trump does decide to push ahead with further tariffs, a source close to the talks said the duties would likely be staggered so as not to "inflame public opinion".

"I don't think it'll go ahead at 25 per cent on 300 billion," the person said on condition of anonymity. "There's a lot of room there to escalate. You can do another 50 billion at 10 per cent, for example."

Speaking on the sidelines of Tuesday's hearing, Herman of the Travel Goods Association said he had "high hopes but not high expectations" that upcoming presidential discussions would lead to a stalling of additional tariffs and a relaxation of existing duties.

 

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.