Ms. Cutler, the US trade policy vis-à-vis China can be described as alternating phases of escalation and deescalation. First of all, we have seen skyrocketing tariffs up to more than 100 percent before the agreement between President Donald Trump and Xi Jinping was reached that the United States allows exports of certain high-tech semiconductors to China, while Beijing agrees to export rare earths to the US. What do you expect as next step in this ongoing trade conflict?
“Both sides are working hard to keep relations stable. Each side for their own reasons for wanting stabilized relations, particularly to provide breathing space to become less dependent on the other for strategic goods. The U.S. is using this period to work with our companies and partners to develop an alternative rare earth and magnet supply chain. And China’s working very hard, for example, to become less dependent and propel its own semiconductor industry and semiconductor equipment industry. The truce reached last November is likely to remain in place for the foreseeable future as Beijing has made it abundantly clear that if we do something against them that they don’t like, they’re more than willing to use this choke point against us. So, we have a kind of stalemate here.
At the same time, both sides are testing each other to see just how far they can go without breaking this truce. Particularly in the past couple of months, we’ve seen both sides announce new import and export restrictions, innovative retaliatory tools and additions to entity lists barring companies from certain commercial activities. We should expect that this trend will continue, but I think both sides will try hard not to escalate to the point where our trade truce would be deemed irrelevant or dead.”
Germany has warmed to proposals out of Brussels that would strengthen European measures against Beijing’s trade practices. Which ramifications would such a shift have for the EU’s trade policy with China?
“Washington remains disappointed when we were ready to work with the EU several years ago to address our mutual China concerns, the EU was reluctant to take the next step. This development was largely driven by the EU not wanting to stray from its WTO obligations and that certain member states, particularly Germany did not want to risk Chinese retaliation. Now, the US has high tariffs on key strategic goods, like electric vehicles and batteries, which are keeping a lot of these Chinese goods out of our market. This has diverted many Chinese exports to the European market raising strong concerns. Even though Brussels now is leaning towards a tougher stance on China trade, many Washington policymakers believe that the ship has sailed regarding closer EU-US cooperation. My personal view is that would be a huge mistake. If we are seriously going to deal with the China challenge to the global economy, we need to be working together. And even though the EU wasn’t ready a few years ago, I would hope that we could find a way to restart these conversations and identify steps we can take together. Moreover, we should invite other countries into these conversations and deal with China collectively rather than as individual countries.”
The US government has imposed new tariffs on imported products from 60 trade partners, arguing that these states haven’t sufficiently upheld the prohibition of forced labor. Before that, special global tariffs of 10 percent have expired after 150 days, and the Supreme Court had ruled against the so-called reciprocal tariffs in February. How do you assess the general US trade agenda with the rest of the world, including the European Union?
“The Trump Administration is intent on imposing tariff hikes against our trading partners, friends and foes alike. Notably, the administration has faced some serious legal issues as it has proceeded down this path. But we’re all learning that the US has multiple different trade tools that it can use. Now it’s relying largely on section 301, complemented by section 232 cases. Earlier this summer, Washington imposed tariffs ranging from 10-12.5 percent on 60 trading partners, including the EU, based on insufficient efforts to curtail imports using forced labor
USTR is now in the final stages of wrapping up the section 301 investigation on structural overcapacity, which is aimed at 15 partners plus the European Union. The timing of that announcement is unclear. We could see the announcement of these tariffs any day, but I caution all of our trading partners that we would need at least 45 to 60 days to put those tariffs into place due to the procedural requirements of needing to go out for public comment and then actually to spend time considering this input. So, even if these tariffs were announced in August, for example, they probably would not come into effect until October at the earliest. And if we’re going to wait for October, certain analysts are saying the White House may then decide to delay the tariffs until after the midterm elections, given how unpopular tariff increases are in the US right now.
USTR in particular is under a lot of pressure to make sure that these investigations are conducted in accordance with the procedural and substantive requirements of this statutory authority. Notably, there aleady have been significant legal challenges to the use of the statute to impose these types of tariffs.”
Which consequences do these new tariffs have for the effectiveness of the Turnberry agreement between the US and the EU?
“The US has been very careful when it’s making new tariff announcements to keep referring to the tariff ceiling of 15 percent agreed to in the Turnberry agreement. The government has also been very clear that there are ceilings with respect to Japan and Korea and other countries as well. My sense is that the administration will stick to its word there. But the question is what happens if there are additional section 232 tariffs? What happens if there’s a new section 301 investigation on EU digital policies? Could these lead to tariffs then that will be stacked on top of the 15 percent tariff of the Turnberry agreement? We don’t know the answer yet. The administration has a very fluid tariff policy and I’m not sure that they know exactly where they’re headed on matters like this. I suspect that Brussels is making it very clear to Washington that if it’s going to proceed with fulfilling its Turnberry commitments, it would expect the US to do so as well.”
Given the fact that President Trump aimed to reindustrialize the United States, gain more revenue, and reduce the federal debt with all the different types of tariffs: To what degree will the US trade policy have an influence on the outcome of the midterm elections on November 3?
“When polls are conducted, as we all know, you can get the kind of answer you want depending on the question. Tariffs in particular are very unpopular. But I do think that there is support for a more muscular US trade policy. When the President keeps talking about how the US is kind of shouldering all of the trade, how the US is taking on all the burdens of trade and security and we’re not being matched by other countries, I think there is some support for that view in the United States. I don’t think there’s substantial opposition to Trump’s trade policy. Now you could argue, tariffs are such a key part of this trade policy. Folks are against tariffs. They should be against his trade policy, too. But I’m not sure that’s what the polling suggests based on the types of questions that are asked and answered. It’s more nuanced than meets the eye.
The key issue for the midterm elections seems to be the issue of affordability. Trade is part of that and tariffs is part of that. But there are also other concerns not really related to trade, including, for example, very high health care costs. So, to the extent that people vote with the issue of affordability on top of their minds, you could argue that’s due to tariffs. I would argue it’s partially due to tariffs, but it’s not the trade. People aren’t voting on the President’s trade policy. If you look at their priorities, they probably put trade policy more towards the bottom than towards the top.
In certain local communities, particularly in the agriculture community of the US, these tariffs have really hurt them. China is buying less agriculture from us. And other countries are diversifying beyond China. We’re not exporting as much as we used to. There’s a lot more competition. So, in some localities the trade issue or the tariff issue may be a decisive one. But when you look nationwide, it will be part of the affordability concerns. Then it’s just hard to parse out what percentage of those concerns is due to trade or tariffs.”
Das Interview führte Robin Fehrenbach.