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Companies take sides as US considers tariffs against China


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Companies take sides as US considers tariffs against China

A bevy of executives painted opposing pictures about the impact of proposed U.S. tariffs on Chinese imports, with some telling officials at a May 15 hearing in Washington, D.C., that the levies would fairly punish China as others warned that they could decimate American companies.

The comments came during the first of three days of scheduled hearings at the U.S. International Trade Commission, which are slated to feature 17 panels and more than 100 witnesses from a range of sectors addressing the proposed additional 25% tariffs on about $50 billion worth of Chinese imports.

The Trump administration floated the tariffs in March in response to a Section 301 investigation conducted by the Office of the U.S. Trade Representative, or USTR, which found Chinese trade practices that harmed U.S. companies.

Although consumer products were largely left off the list prepared by the USTR, televisions from China were not.

The Section 301 Committee, which includes members from various U.S. government departments and agencies, including the departments of Commerce and State, the USTR and Customs and Border Protection, is considering the business community's input as top U.S. and Chinese economic officials meet in Washington to discuss trade.

Mike Mohan, chief merchandising officer for Best Buy Co. Inc., asked the committee to remove flat-panel TVs from the product list due to what he called "negative unintended consequences" on retailers and consumers.

Mohan said China is the only market that can feasibly produce TVs measuring between 30 and 46 inches, adding that a lack of other manufacturing options would lead to an increase of up to 23% in retail prices for those products should tariffs be implemented.

'No alternative sources'

Shifting production to Mexico, another country that produces different-sized televisions, would be impractical, he added. "There is no manufacturing capability to build TVs in the United States," Mohan said. "China is simply the only place with the capacity to develop these TVs. There are no alternative sources."

Other producers of TVs also asked that the product be removed from the proposed tariff list. Jonathan King, vice president of legal affairs for TCL North America, the U.S. division of Chinese TV, cell phone and consumer electronics producer TCL Corp., warned that the tariffs would raise the average consumer price of a TV anywhere from $50 to $200, leading to lower consumer demand.

"Although we build TVs in China, we sell them here and we design them here," King said. "The vast majority of benefits are felt here. The negative impact of the imposition of tariffs will have long-term consequences."

Such consequences would also be felt by California-based smart TV and streaming stick producer Roku Inc., according to Chas Smith, the company's general manager of TV and players.

"Higher prices and fewer TVs sold could stifle our ability to innovate," Smith told the committee. "We ask that Roku TVs be excluded from the products subject to the 301 tariffs."

However, there were industries expressing support for the tariffs, which were introduced in an effort to punish China for its forced intellectual property rights transfers of U.S. companies doing businesses in the country, and to help reduce a $375.2 billion trade deficit.

Tim Brightbill, an attorney with Wiley Rein LLP representing SolarWorld Americas Inc., the U.S. division of German solar panel manufacturer SolarWorld AG, asked the USTR to add solar cells and modules to the list of targeted products, in part because SolarWorld claims to be a victim of past intellectual property cybertheft by China.

Brightbill said the alleged theft resulted in more than $120 million in damages in the form of lost sales and revenue, adding that the company and industry have been "devastated" by Chinese government policies related to intellectual property.

'Beneficial effect'

"We think adding solar cells and modules would have a very beneficial effect on U.S. manufacturing and U.S. workers without harming downstream industries," Brightbill said.

Pittsburgh-based U.S. Steel Corp., which claims to be the country's largest producer of tin mill products and alleges it also experienced cybertheft by China, threw its support behind the tariffs as well.

Robert Kopf, U.S. Steel's general manager of sales, asked that tin mill products, which are used to create items such as food cans, oil filters and decorative cans, be added to the tariff list. Kopf claimed the company was targeted by Chinese cyberhackers in 2014, adding that there have been surging imports of tin mill products from China in recent years.

The public hearings are taking place a little more than a week after top U.S. economic officials met with their Chinese counterparts in Beijing. The talks did little to smooth over ongoing trade tensions between the two countries, which include the Trump administration's threats of more tariffs on an additional, yet-to-be-released list of $100 billion worth of Chinese imports.

In the final panel of the day, several Chinese trade and economic officials sharply contested U.S. accusations of forced technology transfer.

Jian Tan, speaking on behalf the China Chamber of International Commerce, a trade body of the Chinese government, contended the tariffs are inconsistent with World Trade Organization and international law, adding that they could lead to further retaliatory actions.

"Should the U.S. implement the proposed action ... it will lead to massive confrontation between the two countries," Tan said.

U.S. President Donald Trump on March 22 ordered the exploration of additional tariffs on about $50 billion worth of annual Chinese imports, and the USTR released its list of around 1,300 products to target, which include high-tech products such as aerospace, robotics and machinery.

"Tariffs cannot solve any of the problems mentioned in the [301] report, and cannot reduce the trade deficit," Guiqing Wong said at the hearing, speaking on behalf of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.

Others testifying at the first day of hearings included representatives from the automobile, agriculture and chemistry industries.