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Delayed USA - 08/22 11:01:53 pm

U.S. Retreats on Chinese Tariff Threats, Stocks Soar-- 2nd Update

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08/13/2019 | 05:54 pm

By Josh Zumbrun

WASHINGTON -- The Trump administration abruptly offered China -- and U.S. consumers -- a reprieve from sweeping tariffs that were poised to hit on Sept. 1, sending stocks sharply higher and raising hopes for reviving talks on a trade deal.

Trade talks appeared in jeopardy after the Trump administration threatened on Aug. 1 to extend tariffs of 10% to $300 billion in Chinese imports not currently taxed, including many consumer goods. They would come on top of 25% tariffs imposed on $250 billion in imports from China.

The office of the U.S. Trade Representative on Tuesday said it would instead delay the new tariffs on many major categories of items, including smartphones, laptop computers and toys, until Dec. 15.

The USTR said some products would be removed from the tariff lists entirely, based on health, safety, national-security and other factors. The list of excluded items includes some of the biggest-ticket items facing tariffs. Cellphones and laptops alone represent about $80 billion of trade.

The action came after U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin participated in a call on Tuesday with Chinese Vice Premier Liu He regarding the trade talks, which President Trump called a "very good call."

China "would really like to make a deal," Mr. Trump told reporters in Morristown, N.J.

During the call between trade negotiators on Tuesday, "China "lodged solemn representations" regarding Mr. Trump's proposed tariffs due to go into effect on Sept. 1, the Chinese Commerce Ministry said.

The ministry said the U.S. had initiated the call, and that the two sides agreed to speak again by phone in two weeks. It made no mention of plans for face-to-face talks, which had been scheduled to take place in Washington in September.

In a tweet, Mr. Trump again touted the possibility of Chinese purchases of agriculture. Since Mr. Trump threatened to move forward with the tariffs on Sept. 1, China announced it would halt purchases of many U.S. agricultural goods, a move that had deepened the woes of the Farm Belt.

"I think it's good news that the administration has delayed the decision to move forward with raising tariffs," said Myron Brilliant, the head of international affairs at the U.S. Chamber of Commerce. "It gives both sides more breathing they look to get back on track."

The stock market soared on the news of yet another potential thaw in the tensions between the world's two largest economies. The Dow Jones Industrial Average was up about 385 points, or 1.5%, on Tuesday afternoon.

Apple Inc. surged about 4.2% on the news that smartphones, including its iPhone, would be spared until at least December from the proposed 10% tariffs. The reprieve is the second break the Trump administration has granted Apple, whose smartwatches and wireless earbuds were excluded from planned tariffs last year.

Hopes that China could resume buying U.S. crops and meat boosted stocks of agricultural traders like Archer Daniels Midland Co. and Bunge Ltd., which have blamed the tariff battle for distorting international flows of food and pressuring crop prices. Shares of ethanol makers like Green Plains Inc., which had banked heavily on Chinese demand for the corn-based fuel additive, also got a boost.

Soybean futures jumped 1.1% at the Chicago Board of Trade.

The delay in tariffs buys a reprieve for negotiators. Talks between the U.S. and Chinese negotiating teams in Shanghai in July ended without a breakthrough, and a Chinese delegation was planning to visit Washington in September, shortly after the tariffs were scheduled to be imposed.

But without some sort of reprieve, it may have been difficult for China to return to the talks, and any Trump administration hopes of large-scale agricultural purchases to aid the farm economy could have been nixed.

The delay is also a reprieve for U.S. consumers, who would have seen the tariffs kick into effect for goods arriving for the holiday shopping season.

"The tariffs would have hit the kinds of products -- consumer, Christmas toys, things like that -- which would have certainly been felt by the American consumer heading into the holiday season," said Mr. Brilliant of the Chamber of Commerce.

Finally, the delay is also a reprieve for the stock market, which had fallen sharply after the latest round of talks appeared to make no progress. The administration has repeatedly softened its trade rhetoric when the market has weakened. The Dow Jones Industrial Average had fallen by more than 1000 points after the latest round of talks in Shanghai yielded no breakthrough.

The move is the latest seesawing in the talks between Washington and Beijing. The tariffs in question -- on roughly $300 billion in goods -- were first announced in May following a breakdown in U.S.-China talks. They would have come atop the roughly $250 billion in goods from China already facing tariffs, and would result in nearly every item imported from China facing a duty.

Then, Mr. Trump and China's President Xi Jinping reached a truce at a summit in Osaka, Japan, in late June and these tariffs were placed on hold.

But by late July, the Trump administration blamed China for not moving quickly enough to purchase agricultural goods, a move that China said it hadn't agreed to in the first place. It was after those talks in late July that the Trump administration said it would impose this round of tariffs on Sept. 1.

Now a substantial part of those tariffs is delayed.

The USTR also said that it would have an exclusion process for the newest round of tariffs, meaning that individual companies will have the ability to avoid the duties if they successfully make the case that their business would be unduly harmed.

--Jacob Bunge, Tripp Mickle and Alex Leary contributed to this article.

Write to Josh Zumbrun at

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