Status of U.S.-China Trade Talks Before Sept. 1 Tariffs Date May Impact Huawei
The U.S. President today announced that the United States would, starting September 1, 2019, impose a ten percent tariff “on the remaining” $300 million of Chinese goods not yet subject to U.S. tariffs. In a series of tweets, the President made clear that the additional tariffs are in response to failure of the United States and China to reach a trade deal, a circumstance attributed by the President to China’s having reneged on a prior “deal” (China denies this) and a commitment to purchase “agricultural product from the U.S. in large quantities.”
Some have questioned the President’s motives for announcing additional tariffs, including whether the measure may be intended to force additional interest rate cuts by the Federal Reserve. Alternatively, the announcement of new tariffs may, more simply, be designed to precipitate a trade deal. If this is the case- and even if it is not– the announcement of additional tariffs and their stated effective date (if tariffs take effect on September 1) are noteworthy in connection with recent U.S. legal measures targeting Huawei.
September 1 Tariffs: Potential Relevance to Huawei Entity List Designations
On May 16, 2019, the Commerce Department added Huawei and 68 of its non-U.S. affiliates on the Entity List, effectively blocking the listed entities from exports of U.S.-controlled goods and services, including semiconductors and software. A few days later, on May 20, 2019, the Commerce Department issued a Temporary General License (TGL) partially lifting the export restrictions put in place by the Entity List designations.
It remains to be seen whether the TGL will be extended beyond the 90-day period, or if the Commerce Department will adopt measures to implement the President’s G20 statement that U.S. companies would be permitted to sell “product” to Huawei entities. (Read more about the Entity List designations and TGL here).
That said, the September 1 effective date of additional new tariffs is noteworthy because it is 14 days from August 18, 2019, the last day on which the TGL will be effective. Given this proximity in time and the stalled state of U.S.-China trade talks, U.S. and foreign businesses subject to U.S. export controls should follow closely whether harsh measures may be taken against Huawei– such as a non-renewal (immediately or for a longer period) of the TGL, or a limitation, if renewed, of its scope.
U.S. Export Controls, Sanctions as Trade Leverage (or Trade War Weapons)
Companies and others affected by export restrictions on Huawei entities should bear in mind that the Trump Administration– or certain of its elements– appear to regard U.S. export controls, sanctions, and other laws as bargaining chips in trade talks, or as trade war weapons. In this context, one potentiality is that export restrictions and other legal measures may be taken against Huawei and/or other Chinese firms to drive trade talks in August and shortly after. Should the U.S.-China stalemate persist beyond September (as now appears likely), that circumstance may also inform additional legal measures against Huawei or other Chinese entities pursuant to Executive Order 13873, which, as discussed here, does not mention Huawei (or any entity) but is understood to have been drafted with Huawei (and other Chinese firms) in mind.