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Kudlow Says Tariffs ‘Will Play A Role’ In Future China Talks, ZTE Will Remain A Separate ‘Enforcement Issue’

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Chinese President Xi Jinping and his wife, Peng Liyuan, with President and Mrs. Trump at their Mar-a-Lago estate

WASHINGTON, May 21, 2018 — President Donald Trump’s trade war with China may be on hold after recent talks, but tariffs are still on the table, National Economic Council Director Larry Kudlow said Monday.

 “I think we’re just rolling, there’s a lot of momentum from this framework,” Kudlow said, referring to the outcome of recent trade talks between Chinese representatives and U.S. Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and Trump trade adviser Peter Navarro.

Earlier in the day, Mnuchin called the result of the talks a “pause” in the looming trade war between the United States and China brought on by Trump’s announcement that he’d be imposing tariffs on Chinese goods.

Kudlow explained that the tariffs  Trump had announced — which had not yet gone into effect — were “suspended for the moment” but added that they “are going to play a role in any negotiation, and enforcement.”

ZTE ‘part of the landscape’ but won’t be included in trade talks

While Kudlow acknowledged that the issue of whether the Trump administration will allow Chinese telecommunications equipment maker ZTE to resume doing business with American companies is “part of the landscape,” it won’t be part of trade discussions because it is an “enforcement issue.”

ZTE became an issue in US-China relations last month after the Commerce Department’s Bureau of Industry and Security issued an order denying ZTE the ability to export American-made products for seven years. But President Trump announced last week that he was asking Commerce Secretary Wilbur Ross to find a solution, which Kudlow said was in response to a request from Chinese President Xi Jinping.

The ban was a response to misconduct by ZTE executives

In March, ZTE executives agreed to settle the sanctions violations by paying a $1.19 billion fine and accepting a suspended seven-year export ban to automatically take effect if it was found that the company violated any aspect of the settlement agreement or committed any more violations of American Export Administration Regulations.

Because the two major components in most mobile phones — Google’s Android operating system and radio chips made by San Diego, California-based Qualcomm — are made in the United States,  an export ban is a potential death sentence for the company.

But the Commerce Department imposed the ban after investigators discovered that company executives had made false statements and obstructed justice during negotiations to settle charges against the Shenzen, China-based company, formally known as the Zhongxing Telecommunications Equipment Corporation, for violating sanctions by selling telecom equipment to Iran and North Korea.

The Chinese company will ‘not be off the hook’

Asked about whether American officials’ myriad concerns with ZTE would be addressed, Kudlow promised that the company would not be off the hook.

“If anybody thinks that any changes are going to let them off scot-free, they are wrong,” Kudlow said while speaking to reporters outside the west wing of the White House.

Kudlow emphasized that any deal with Beijing that allows ZTE to once again purchase American-made components needed for mobile phones will involve “large fines” and “huge compliance.

“My sense is you might be looking at some changes around the edges, but I don’t know,” Kudlow added before explaining that any decision will be up to Commerce Secretary Wilbur Ross.

Chinese telecom equipment makers like ZTE and Huawei have also long been considered security risks by the American defense and intelligence establishments, which fear that the Chinese government-owned companies insert backdoor that could be used for espionage into their equipment.

As a result, the Pentagon recently banned the sale of Huawei and ZTE phones in the subsidized retail stores located on military bases known as Post Exchanges, and the Federal Communications Commission also issued an order prohibiting Universal Service Fund dollars from being spent on gear from either manufacturer.

Still, Kudlow reiterated that the Trump administration is “aware of all that,” implying that even if the effort to find a solution is successful, it would not mean ignoring any of the government’s concerns.

“We are aware of security issues, sanctions issues, technology theft issues, et cetera,” he said.

(Creative Commons Image: Chinese President Xi Jinping and his wife with President Donald Trump and Melania Trump at their Mar-a-Lago estate)

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Andrew Feinberg is the Managing Editor and lead Washington Correspondent for Breakfast Media, and covers the White House, Capitol Hill, courts and regulatory agencies for BeltwayBreakfast and BroadbandBreakfast.com. He has written about policy and politics in the nation's capital since 2007.

Trade

‘They Will Be Taxed Like Never Before!’ Trump Threatens Harley-Davidson Over EU Factory Plans

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President Trump and Vice President Pence inspect Harley-Davidson motorcycles in the White House driveway in February 2017, the day Trump hosted company executives and employees for lunch. (Shealah Craighead/The White House)

WASHINGTON, June 26, 2018 — President Donald Trump on Tuesday threatened to impose higher taxes on Harley-Davidson if the motorcycle builder goes ahead with plans to circumvent the European Union’s recently-announced tariffs against them by moving some manufacturing to Europe.

Trump’s threat, made in the course of a Tuesday morning tweet storm, turned the move by Harley-Davidson — a company he’d embraced as an example of resurgent American industry under his watch — into a fit of personal pique.

“A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them. If they move, watch, it will be the beginning of the end – they surrendered, they quit! The Aura will be gone and they will be taxed like never before!” Trump wrote.

It was unclear how the president planned to tax the company “like never before”  without the consent of Congress, which has the sole power to levy taxes under Article I of the Constitution.

The Milwaukee-based motorcycle builder had played a bit role in one of the earliest controversies of Trump’s presidency when he canceled a visit to its Wisconsin factory, reportedly for fear of encountering protests. Instead, he invited executives to the White House, where he claimed his stance on trade was encouraging manufacturers to return to the United States.

Trump has been lashing out at Harley since Monday

But the president began lashing out at Harley-Davidson since late Monday after the company announced it would open a facility to produce motorcycles for the European market to avoid EU tariffs.

Those tariffs were imposed after Trump declined to renew an exemption to his 25 percent tariff on steel and ten percent tariff on aluminum for Canada, Mexico, or the European Union, and were designed specifically to target industries and companies Trump has promoted or that form part of his political base.

Earlier on Tuesday, Trump also accused Harley-Davidson of using the tariffs as an excuse to move more operations overseas, citing the company’s decision to open a Thailand-based plant to build motorcycles for the Asian market.

“Early this year Harley-Davidson said they would move much of their plant operations in Kansas City to Thailand. That was long before Tariffs were announced. Hence, they were just using Tariffs/Trade War as an excuse. Shows how unbalanced & unfair trade is, but we will fix it,” Trump wrote.

He continued, claiming that his administration is “getting other countries to reduce and eliminate tariffs and trade barriers that have been unfairly used for years against our farmers, workers and companies,” as well as “opening up closed markets and expanding our footprint.”

Trump closed by proclaiming that other countries “will pay tariffs” if they do not “play fair,” despite the fact that tariffs are taxes paid by consumers, not by other countries.

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Trade

Kudlow Calls Trump Tariffs and Twitter Tirades Toward Canada ‘Part Of A ‘Family Quarrel’

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WASHINGTON, June 1, 2018 — President Donald Trump’s decision to no longer exempt Canada, the European Union and Mexico from tariffs on steel and aluminum are part of a “family quarrel” that could be resolved soon, National Economic Council Director Larry Kudlow said Friday.

“This is what I regard as a family quarrel, and the conversations are wide open and could well be solved in the months ahead as the conversations continue,” said Kudlow, who spoke to reporters Friday morning outside the West Wing of the White House.

Kudlow called Trump’s tariffs, which he has imposed using national security exemptions in existing trade agreements, “really important” in the president’s push for what he calls “reciprocal” trade agreements.

‘[Trump] wants reciprocity, OK? These are important concepts in the trading game,” Kudlow explained, offering the example of some countries’ tariffs on cars and noting that if a country taxes American cars at 10 percent and the United States taxes that country’s cars at two and a half percent.

Such a situation “needs to be changed,” he said.

While Trump has long railed against other countries tariffs — particularly those levied on American goods by China — his rhetoric on trade has mostly focused on trade deficits, which can often have less to do with tariffs as much as other countries having different resources and different economies. Although the United States does run a trade deficit with many countries in terms of goods sold, it more often runs a surplus when it comes to services because of the United States’ world-leading technology industry.

His focus on deficits was on full display Friday morning when he took to Twitter to rail against Canada a day after Canadian Prime Minister Justin Trudeau railed against Trump’s decision to no longer exempt Canada from the 10 percent tariff on Aluminium and the 25 percent tariff on steel imposed earlier this year.

In a statement Thursday, Trudeau had called Trump’s decision “totally unacceptable” and “an affront” to one of America’s oldest allies, whose soldiers have fought and died alongside their neighbors.

“We have to believe at some point common sense will prevail,” said Trudeau. “But we see no sign of that in the U.S. action today.” He also called the development a “turning point in the Canada-U.S. relationship.”

Trump responded overnight with a statement declaring that the US “has been taken advantage of for many decades on trade” and that “those days are over” before recounting a message conveyed to Trudeau: “The United State [sic] will agree to a fair deal, or there will be no deal at all.”

He continued his tirade Friday morning with a tweet in which he claimed that Canada “has treated our Agricultural business and Farmers very poorly for a very long period of time” and called one of America’s largest trading partners ” Highly restrictive on Trade!”

“They must open their markets and take down their trade barriers! They report a really high surplus on trade with us. Do Timber & Lumber in U.S.?”

When Kudlow was asked if Trump’s frequent invocation of trade deficits — with the implication that countries must buy more American goods instead of lowering barriers to entry — was an example of mercantilist (in which one country is forced to buy goods from another, a frequent occurrence in colonial economies) thinking, Kudlow exclaimed: “No, man!” and changed the subject back to tariffs by adding that “the best way to solve trade barriers is to lower the barriers.”

Despite Trump’s frequent denunciations of trade agreements, Kudlow maintained that the president is a “free trader,” but added a caveat:

You’ve got to clear away the debris of unfair and illegal trading practice which has come to litter the world trading system which is badly in need of reform,” he said. “If you can take that and clear that debris, you’ll have the proverbial rainbow at the end of which is a pot of gold, and if you open up that pot, we will have faster economic growth.”

 

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Trade

White House Announces More Steps To Target Chinese Intellectual Property Theft

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WASHINGTON, May 29, 2018 — The Trump administration is moving forward with plans to impose a 25% tariff on Chinese goods containing “industrially significant technology,” and will take further steps to combat China’s theft of American intellectual property with new export controls and by bringing a case against China at the World Intellectual Property Organization.

These new steps, which the White House announced in a Tuesday press release, include imposing new investment restrictions and export controls on “Chinese persons and entities related to the acquisition of industrially significant technology,” as well as the tariff, which comes after Treasury Secretary Steve Mnuchin said the brewing trade war with China President Donald Trump had threatened was “on hold.”

Additionally, the White House said the US will move forward with a case it brought against China at the World Intellectual Property Organization in March.

The list of goods subject to the tariff will be announced on June 15, with the new export controls and investment restrictions to come 15 days later.

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