A6| Friday, August 2, 2019 **** THE WALL STREET JOURNAL.
tariffs, which have focused
largely on industrial goods, the
$300 billion tranche is set to
include a host of consumer
products, from electronics and
cellphones to apparel.
The tariffs would affect
about $45 billion in cellphones,
$39 billion in laptops and tab-
lets, and $5.4 billion in video-
game consoles, according to
the Consumer Technology As-
sociation, a trade group.
The tariff plans threaten to
undermine U.S. sales of iPhone
and other Apple products,
which are largely produced in
China. Apple would either have
to eat the tariff costs on
iPhones—which analysts have
estimated would be about $
on the import price of XS mod-
els—or pass those costs on to
customers.
Apple’s business in China
also faces risks from potential
Chinese retaliation, trade ex-
perts and analysts said. The
company, which has relied on
China, Hong Kong and Taiwan
for about a fifth of sales, would
be a potential target for China
because it had a nearly 6%
share of the Chinese smart-
phone market in the June
quarter.
Shares of Apple fell 2.1%
Thursday, erasing a 2% surge
on Wednesday after the com-
pany reported it returned to
sales growth in the three
month period ended June 29.
Dow Jones & Co., publisher
of The Wall Street Journal, has
a commercial agreement to
supply news through Apple
services.
The toy industry, which
sources about 85% of products
from China, has been bracing
for the tariffs, including mov-
ing manufacturing to places
like Vietnam, Indonesia and
Mexico and importing the
goods into the U.S. sooner.
Hasbro Inc. has notified re-
tailers that it plans to raise
prices on any toys hit by tariffs
and expects that retailers will
take ownership of inventory inin Congress with its behavior,”
wrote Sen. Chuck Grassley (R.,
Iowa), the chairman of the Sen-
ate Finance Committee, in a
tweet. “China has a responsibil-
ity to follow through on its
commitments on fentanyl + ag
purchases + trade talks.”
The Trump administration
appears to be aiming to allevi-
ate consumer and business
concerns by starting with tar-
iffs of only 10%, a move that
also allows U.S. officials room
to raise the tariff level in the
future if China doesn’t follow
through with concessions.
“The 10% is for a short-term
period and then I could always
do much more or less, depend-
ing on what happens with re-
spect to a deal,” Mr. Trump
said.
Meanwhile, U.S. farmers are
suffering from retaliation from
China and other countries
where the Trump administra-
tion has penalized trade. Farm
products are facing a disadvan-
tage in Japan, which has
opened its markets to other
countries through the Trans-
Pacific Partnership, a deal Mr.
Trump withdrew from.
The U.S. team in Shanghai
this week, led by Mr. Lighthi-
zer and Mr. Mnuchin, was hop-
ing the Chinese side would
commit to purchasing a de-
fined quantity of U.S. agricul-
tural goods, people following
the talks said.
China is likely holding out
on buying large amounts of
U.S. farm goods while waiting
for concessions, the people
said.
Mr. Trump has said his ad-
ministration would take a
softer approach on Chinese
telecommunications giant Hua-
wei Technologies Co., allowing
firms to do business with the
blacklisted company if it
doesn’t trigger security con-
cerns.
—Tripp Mickle
in San Francisco
and Paul Ziobro in New York
contributed to this article.Trade Deal” with China.
But Mr. Trump chided Presi-
dent Xi Jinping of China for not
following through on what the
Trump administration views as
prior commitments. “China
agreed to...buy agricultural
products from the U.S. in large
quantities, but did not do so,”
he wrote on Twitter. “Addition-
ally, my friend President Xi said
that he would stop the sale of
Fentanyl to the United States—
this never happened, and many
Americans continue to die.”
An official at the Chinese
embassy in Washington didn’t
respond to a request for com-
ment.
The Wall Street Journal re-
ported this week that the slow
progress in trade talks was
partly the result of a new tactic
from Beijing, which increas-
ingly thinks waiting may pro-
duce a more-favorable agree-
ment.
In the U.S., business groups
condemned the escalation.
“Tariffs are not the answer,
escalation is not the answer,”
said Myron Brilliant, head of
international affairs at the U.S.
Chamber of Commerce in
Washington. “We have to be
careful about actions under-
taken by either government
that would stir the pot and not
create the best atmosphere for
getting these complicated talks
back on track.”
The tariffs, essentially a tax
paid by importers in the U.S.,
affect practically all the groups
of Chinese products not hit
previously, with the exception
of select categories, such as
medicines.
Unlike previous rounds ofContinuedfromPageOnePresident
Threatens
New Levies
the U.S. instead of China, which
will add to the toy maker’s
shipping and warehousing
costs, according to Chief Finan-
cial Officer Deborah Thomas.
Like Hasbro, Mattel, which
makes Barbie dolls and Hot
Wheels cars, is looking to re-
duce its manufacturing foot-
print in China. “We have put
together a contingency plan
and are working closer with re-
tailers to make sure we miti-
gate the impact,” Mattel CEO
Ynon Kreiz said in an interview
last month.
Toy makers may struggle to
raise prices during the holiday
season because they have al-
ready set prices with retailers,
said Steve Pasierb, president
of the Toy Association trade
group, meaning that the tariffs
will hit the manufacturers’
profits. A larger concern isthat as prices rise for other
goods, consumers may think
twice about spending as much
on discretionary purchases
like toys.
The tariffs plan is the latest
move by Mr. Trump to put
pressure on the Chinese side in
hopes of winning concessions
to help U.S. businesses and
farmers. Previous warnings of
additional tariffs have often
been postponed, but three
rounds eventually took effect.
Many Republican and Demo-
cratic lawmakers have backed
Mr. Trump’s strategy of con-
fronting Beijing as a necessary
step to achieve structural
changes in the Chinese econ-
omy. “Tariffs aren’t the only so-
lution President Trump should
use to pressure China, but
China isn’t making any friendsThe plans could
undermine U.S. sales
of iPhone and other
Apple products.Mr. Trump and Japanese
Prime Minister Shinzo Abe are
both scheduled to attend gath-
erings of world leaders in Au-
gust and September, which
could provide venues for a fi-
nal deal to emerge.
President Trump pulled the
U.S. out of the unratified 12-
nation Trans-Pacific Partner-
ship, which included Japan, on
his first working day in office
in 2017. A revised TPP took ef-fect last year without the U.S.,
and now U.S. farmers are com-
plaining as member coun-
tries—including Australia,
Canada and New Zealand—as
well as the European Union
get greater access to Japan’s
long-protected markets for
beef, pork and dairy products.
American farmers are also
hurting from diminished sales
to China, which has cut U.S.
agricultural purchases in retal-iation for Mr. Trump’s tariffs
on more than $250 billion in
Chinese imports.
“Agriculture suddenly rose in
prominence on the U.S. agenda
because U.S. farmers have taken
such a hit from foreign retalia-
tion against Trump’s trade poli-
cies,” said Jeffrey Schott, a
trade expert at the Peterson In-
stitute for International Eco-
nomics in Washington.
Mr. Trump said in May thatthe two sides would seek prog-
ress on a deal after Japan’s
July parliamentary elections,
which favored Mr. Abe’s party.
Mr. Lighthizer has told Con-
gress he might try to achieve a
relatively quick deal with
Japan as a prelude to pursuing
a much more comprehensive
trade agreement—one similar
to the U.S.-Japan framework
under the TPP.
“The administration is seek-U.S. NEWS
ing an early outcome from the
negotiations to ensure, among
other things, that U.S. agricul-
tural exporters have a level
playing field in terms of access
to Japan’s market,” Mr. Lighthi-
zer said in response to written
questions from Sen. Ron Wyden
of Oregon, the top Democrat on
the Senate Finance Committee.
It wasn’t immediately clear
from Mr. Lighthizer’s congres-
sional comments whether the
initial deal would require the
U.S. to lower tariffs on Japa-
nese products in response to
Japan lowering its barriers to
American agricultural goods,
or whether the administration
would submit an early deal
with tariff cuts for ratification
in Congress.
A spokeswoman for Mr.
Lighthizer declined to com-
ment on the talks.
The people familiar with the
talks say negotiators are look-
ing at the possibility of using
existing tariff authorities, in-
cluding a provision of the 2015
trade law, to trim tariffs on
Japanese goods and seal a deal
without a vote from lawmakers.
Congress over the years has
delegated broad tariff author-
ity to the president, and Mr.
Trump, who has frequently
raised tariffs under special
laws, could seek to use such
laws to lower tariffs, they say.WASHINGTON—The U.S. and
Japan are working to hammer
out a limited trade pact that
would pave the way for more
U.S. farm exports to Japan,
while dropping the threat of
U.S. tariffs on Japanese cars.
Such an accord with Japan
would give President Trump a
modest win amid diminished
expectations for a landmark
deal with China and uncertainty
over congressional ratification
of the administration’s updated
deal with Mexico and Canada.
U.S. Trade Representative
Robert Lighthizer met Japa-
nese Economic Revitalization
Minister Toshimitsu Motegi in
Washington on Thursday as
the negotiations shift into
high gear this week.
One of the options is ham-
mering out a deal that
wouldn’t need ratification in
Congress, according to people
familiar with the talks.
“I think we’re getting close
to something with Japan,”
Sen. Chuck Grassley (R., Iowa),
the chairman of the Senate Fi-
nance Committee, told report-
ers on Wednesday.
Mr. Motegi sounded a simi-
lar note in Tokyo this week,
saying “there isn’t much day-
light left” between the two
sides in the talks.
BYWILLIAMMAULDIN
U.S., Japan Approach Limited Trade Pact
President Trump and Japanese Prime Minister Shinzo Abe are
scheduled to attend gatherings of world leaders in coming weeks.ANDY RAIN/PRESS POOLAmerican farmers are suffering from retaliation from China and other countries where the Trump administration has penalized trade.The value of completed U.S.
business deals backed by Chi-
nese investment money re-
mained below $5 billion dur-
ing the first half of 2019, in
line with previous years. Deal
value in these foreign direct-
investment transactions
peaked in 2016, and began fall-
ing after Beijing discouraged
outbound capital flow.
Researchers recorded a pre-
liminary drop in a second,
smaller category of invest-
ment: venture-capital transac-
tions involving Chinese money
backing the U.S. tech sector
and other businesses deals.
“Investors seem to have de-
cided to put their investments
on ice until there is enough
confidence that a worst-case
outcome of a deep and messy
decoupling can be avoided,”
the report said.
The report also tracked the
flow of U.S. investment money
into Chinese businesses, a fig-
ure that has held steady in re-
cent years. That figure tallied
$6.8 billion for deals com-
pleted during the first six
months of the year.
Chinese investment in the
U.S. was also likely affected by
tougher restrictions imposed
by the U.S. to prevent China
from acquiring stakes in com-
panies that could give Beijing
a strategic edge in sensitive
technology, the report said.WASHINGTON—The flow of
investment money between
China and the U.S. continued to
decline in the first half of 2019
as trade tensions took their
toll, according to a new report.
The value of foreign direct
investment and venture-capi-
tal deals between the two
countries fell to $13 billion
during the first six months of
the year, a decline of 18% com-
pared with the previous six-
month period, according to
data released Thursday. In-
vestment is down 49% from
the first half of 2018.
The $13 billion figure marks
the lowest value since 2014, a
sign of investor anxiety over
stalled trade negotiations,
tougher U.S. scrutiny of for-
eign deals and the Trump ad-
ministration’s restrictions on
telecom giantHuawei Tech-
nologiesCo., the report says.
“Cross-border investments
have become one of the first
major casualties of U.S.-China
tensions,” said Thilo Hane-
mann, one of the report’s au-
thors and a partner with re-
search firm Rhodium Group.
Rhodium Group released
the report with the National
Committee on U.S.-China Rela-
tions, a nonprofit that pro-
motes cooperation between
the two countries.
BYKATYSTECHFEREK
Tensions Over Trade
Curtail Investments
DANIEL ACKER/BLOOMBERG NEWSTokyo Ends Seoul’s
Preferred StatusJapan removed South Ko-
rea from a list of preferential
trading partners, widening a
rift between the two U.S. allies
that Tokyo says has become
unbridgeable owing to a dis-
pute over World War II repara-
tions.
Prime Minister Shinzo Abe’s
cabinet approved plans on Fri-
day to remove South Korea
from Tokyo’s “white list” of 27
nations that get preferential
treatment on export approval
on more than 1,000 items in-
cluding machine tools and elec-
tronic parts. The move could
require those exporting from
Japan to South Korea to ob-tain licenses for a range of
items, such as chemicals and
electronic parts.
The broadened trade spat
between Tokyo and Seoul
marks the latest hit to the
global supply chain already
roiled by uncertainty connected
to U.S. tariffs on China.
U.S. Secretary of State
Mike Pompeo is set to meet
with the Japanese and South
Korean foreign ministers in
Bangkok later Friday.
In July, Japan imposed con-
trols on certain chemicals, say-
ing it was responding to a
breakdown in trust after South
Korea’s Supreme Court ruled
that some Japanese companies
must compensate South Kore-
ans for wartime forced labor.
—Mayumi Negishi
and Eun-Young Jeong