Rubber industry awaits U.S.-China trade talks as higher tariffs loom

WASHINGTON—Some business sectors were nervous, others encouraged at President Trump raising tariffs on $200 billion worth of Chinese goods even as a Chinese delegation was en route to Washington to continue trade talks with the U.S.

The Office of the U.S. Trade Representative issued a notice May 8 for May 9 publication in the Federal Register, stating that all Chinese goods which received tariffs of 10 percent in September 2018 will have those tariffs raised to 25 percent as of May 10.

This list, which covers 5,745 separate items and runs to 194 pages of text, includes virtually every type of pneumatic tire; many rubber chemicals, synthetic rubbers and grades of natural rubber; and rubber auto and industrial parts including V-belts, conveyor belts, tubes, pipes and hoses.

In the notice, USTR also said it would establish a process by which individuals and companies affected by the tariffs may request that particular products be excluded from the additional duties.

In a May 8 statement, the Chinese Ministry of Commerce said it would retaliate against higher U.S. tariffs.

"If the U.S. tariffs are implemented, China will have to take necessary countermeasures," the ministry said.

The Auto Care Association, the National Retail Federation and the American Chemistry Council were among the business groups urging Trump to reconsider raising tariffs.

On the other hand, the Alliance for American Manufacturing cheered Trump's stance against unfair Chinese trade practices. Retread Instead, a coalition of retreaders that promotes the economic and environmental advantages of retreading, said new tariffs would be helpful to retreaders, though not as much as the antidumping and countervailing duties levied against Chinese truck and bus tires earlier this year.

In two tweets May 5, Trump said he would institute the new tariffs, which he sanctioned under Section 301 of the Trade Act of 1974. He also said he would place 25% tariffs on another $325 billion worth of Chinese goods, but the May 8 USTR notice did not mention that.

Section 301 allows the president to take remedial action against imports from countries that commit unfair trade practices against U.S. goods.

Trump originally planned to institute the 25% tariffs Jan. 1 of this year. He later moved the date to March 1, then finally postponed them indefinitely pending the results of trade talks with China.

However, Trump on May 5 said he believed the tariffs were working and should be raised.

"For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods," he wrote. "These payments are partially responsible for our great economic results."

Trump doubled down on his comments May 8, saying his proposals to raise tariffs were having the desired effect on the Chinese.

"The reason for the China pullback & attempted renegotiation of the Trade Deal is the sincere HOPE that they will be able to 'negotiate' with Joe Biden or one of the very weak Democrats, and thereby continue to ripoff the United States ($500 Billion a year) for years to come…" Trump tweeted.

The ACA, which opposed tariffs on Chinese goods from the beginning, issued a statement May 6 asking Trump to reconsider.

The organization said it supports the Trump administration's efforts to combat China's unfair trade practices, but opposes the use of tariffs as a negotiating strategy.

"The proposed sudden increase from 10% to 25% would have an immediate negative impact no only on the U.S. businesses that manufacture and distribute these parts, but the motoring public who will see higher prices on a wide range of products," said ACA President and CEO Bill Hanvey.

David French, NRF senior vice president for government relations, said his organization also opposes tariffs.

"Tariffs are taxes paid for by American business and consumers, not by China," French said. He cited a recent report stating that the 25% tariffs would cost the U.S. 934,000 jobs, cost the average U.S. family $767 and reduce the Gross Domestic Product by 0.37 percent.

ACC President and CEO Cal Dooley said the risks of using tariffs as a negotiating tactic with China are great, and the potential benefits unclear.

"China supplies the United States with several chemicals which are not available anywhere else and which are critical inputs to U.S. manufacturing," Dooley said.

"China is also the third-largest export market for U.S. chemicals manufacturers," he said. "Future growth for our industry depends on a strong trading relationship with China and a trade policy that creates certainty and predictability for investors."

AAM Editorial Manager Matthew McMullan blogged on the AAM website May 8, agreeing with the administration's sentiments that the Chinese were "backsliding" on their commitment to resolve trade issues with the U.S.

"There's a lot of bipartisan support for the tough negotiation position the administration has taken," McMullan wrote. "So don't settle for selling soybeans, Mr. President!"

Clif Armstrong, president and CEO of Marangoni Tread North America, spoke on behalf of Retread Instead, noting that the new tariffs are over and above the countervailing and antidumping duties the International Trade Commission implemented in mid-February.

"While the Section 301 trade tariff moving form the current 10% to 25% will have a positive impact on making both non-Chinese-produced new tires and retreading as a whole more competitive, it will not have the same impact as the AD and CVD will have," Armstrong said.

Nevertheless, "anything that brings parity to the market that allows quality and cost per mile to be a determining factor versus simply single-use and low acquisition cost is welcome," he said.

The stock market reacted shakily to the news of the higher tariffs. The Dow Jones Industrial Average, after dropping 473 points May 7, regained only 2.51 points May 8 to close at 25,967.33.