State of Affairs: Trade and Tariffs

The United States (U.S.) has experienced many policy changes since the Trump administration came into power in January 2017. This can specifically be seen in the trade realm and actions toward China and the European Union (EU). The administration has both imposed and threatened tariffs with both the EU and China, making these two regions important to watch closely in the coming year.

While the administration has taken trade action with a few countries, they have shown specific interest in the U.S.-China relationship and ensuring that any unfairness or unreasonable behavior on China’s part is mitigated. In an attempt to put the U.S. and China on equal footing, the administration has imposed three rounds of tariffs on Chinese goods exported to the U.S.  The total of all three lists equals about $250 billion worth of goods, with the most recent round starting as a 10% tariff with the promise to increase to 25% in 2019. Following a productive meeting with President Xi Jinping in Argentina at the G20 Summit, President Trump granted a 90-day delay in the tariff increase from 10 to 25% to allow time for Chinese and U.S. trade negotiations. If the U.S. and China are not able to reach an agreement by the 90-day deadline, the tariffs will then be raised to 25%. While the United States Trade Representative (USTR, the United States government agency responsible for developing and recommending United States trade policy to the President) has allowed the opportunity for a product exclusion process for the first two lists of tariffs, an exclusion process has yet to be seen for the third list. USTR continues to face Congressional pressure to allow for an exclusion list, but there is some concern swirling over reporting that it seems unlikely one will be put in place. While USTR has received many requests for exclusions from the first two tariff lists, they have granted little exclusions in December 2018. USTR is said to be facing additional delays in granting exclusions because of the recent government shutdown and furloughed employees.  

While many U.S. companies and consumers have felt the impact of the imposition of these three lists of tariffs, the specific desired outcome has not been made clear by the administration. It is easy to assume that the intent is to move manufacturing out of China and back to America to create more U.S. jobs, but no intention has been indicated as definite by the administration except to change Chinese behavior. This uncertainty has left American businesses and consumers wondering and hopeful for clarity. While the impact of these tariffs is undeniable for American consumers and businesses, the administration seems steadfast in their efforts to transform Chinese behavior and continue to believe that this strategy is the best way to achieve this. This assumption is strengthened by the report update released by the United States Trade Representative Robert Lighthizer on November 20th, 2018 stating that China has not changed any of the behavior USTR previously deemed as unfair practices. 2019 promises to be an action-packed year in the trade realm, and specifically for the U.S.-China relationship.

The Trump Administration has also taken trade action with the EU specifically regarding the importation of cars from the EU into the U.S. In May of 2018, the Trump administration started a Section 232 investigation of importation of auto parts and vehicles based on whether or not they pose a threat to U.S. national security. The administration threatened to impose a 25% tariff on auto imports leading up to a July meeting between President Trump and European Commission President Jean-Claude Juncker. Following this July meeting, a joint announcement was made that both parties would hold off on further tariffs while working toward a bilateral trade agreement. The administration has also felt Congressional pressure not to implement these Section 232 auto tariffs which would more than likely resurface should a tariff threat from the administration remerge. With the recent news that General Motors would be closing some of its plants and cutting jobs, President Trump stirred up the topic of auto tariffs once again on Twitter, fueling nervousness. While the U.S. trade future with China and the EU are uncertain, many of these major decisions and changes are likely to be determined in the coming year, leading up to the next presidential election.

How This Impacts Mobility

The EU and China are two important markets for workforce mobility, and the relationship between the U.S. and the countries within the EU and with China has a direct impact on the decisions of companies as to where to operate and locate facilities and offices. We are, therefore, likely to see shifts in business practices, immigration policies and, ultimately, workforce mobility as a result of the negotiations on trade and tariffs.

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