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US fears over economic damage from further tariffs on China

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The White House’s awareness that further tariffs on Chinese goods would be “more detrimental to the United States” than earlier duties has led the Trump administration to urgently pursue a partial deal, according to a former leading trade adviser to the US president.

“The administration designed the tariffs so that the initial tranche would be much more impactful to China than to the United States,” said Clete Willems, who left his role as deputy director of the National Economic Council in April after also working as special assistant to US President Donald Trump on trade and economics.

Willems, who was a key negotiator in early trade war talks with China, said the US built an algorithm to ensure that the “initial tariffs maximise the pain on China and minimise the pain on the US consumer”.

But he added: “The more tariffs you put into place, eventually you’re going to get to the ones that hurt the US more than China and we’re getting there now.

“And I do think that there was a legitimate recognition among folks in and around the White House that these new sets of tariffs would be more detrimental to the United States than earlier sets of tariffs. That has created an incentive to try to figure out if there’s a way to make some progress before they go into effect,” said Willems, who worked under the council’s director Larry Kudlow before his departure.

Washington and Beijing agreed in principle to a “phase one” trade deal last week, offering a temporary respite from a 15-month dispute that has rattled markets and sparked fears about global economic stagnation.

As part of deal, the US postponed indefinitely a tariff increase from 25 per cent to 30 per cent on US$250 billion of Chinese imports that had been set to go into effect Tuesday. Trump has not yet decided whether to postpone a new 15 per cent levy on about US$160 billion of Chinese goods – including popular products like smart phones, laptops and TVs – that would take effect December 15. But the US president could waive that if the interim deal was finalised in time for his meeting with Chinese president Xi Jinping at the Asia-Pacific Economic Cooperation (Apec) summit in Chile in mid-November.

Willems’ statement runs counter to the oft-used White House line that tariffs are a money spinner for the US Treasury. Instead, they reflect genuine concern that the implementation of tariffs on December 15 could be the moment the trade war hits the pockets of Trump’s political base – days before Christmas.

China has insisted the US should lift all additional tariffs on Chinese products as a condition for any trade deal, saying the tariff war is hurting both countries.

Source: South China Morning Post

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