That the U.S. made “unreasonable demands” on China “through maximum pressure” is the “underlying reason” why 11 rounds of negotiations “failed to yield an agreement,” said a Chinese Foreign Affairs Ministry spokesperson Monday. “This wouldn't work from the very beginning.” When U.S. threats didn't work and “instead led to widespread doubts at home and abroad as well as market fluctuations,” the U.S. “resorted to muddying the waters and shifting the blame,” he said. “The international community bears witness to the sincere and constructive attitude China has shown in the past 11 rounds of negotiations.” There’s “hope for success only when the consultations proceed on the right track of mutual respect, equality and mutual benefit,” he said. The Office of U.S. Trade Representative didn’t comment.

The Trump administration's decision to examine emerging technologies as candidates for export controls could cost U.S. businesses tens of billions of dollars and threaten thousands of jobs, the Information Technology & Innovation Foundation reported, in an email Monday. If substantial export controls are enacted, ITIF said firms “could lose $14.1 billion to $56.3 billion in export sales over five years." The Commerce Department Bureau of Industry and Security seeks to expand export controls to technologies that are or may soon be essential to national security but aren't export-regulated. A Nov. 19 Federal Register notice sought feedback from companies on “identifying emerging technologies,” including products such as artificial intelligence and machine learning technology." ITIF warned of the harm that it said could result if Commerce defines “an overly restrictive set” of technologies, saying that could “significantly impede competitiveness of certain U.S. industries and stifle their “output, exports and employment growth.”

A Chinese Foreign Ministry spokesperson sidestepped questions at a Beijing news conference Friday about media reports suggesting new U.S.-China trade talks were off the table for now. Presidents Donald Trump and Xi Jinping “have maintained contact through various means,” said the spokesperson. The Office of the U.S. Trade Representative didn’t comment Friday. The U.S. and China “intend to continue further discussions,” said a USTR notice Friday in the Federal Register officially proposing the 25 percent Section 301 tariffs on $300 billion in Chinese goods not previously dutied (see 1905140025). Requests to appear at public hearings on the proposed List 4 tariffs are due June 10 in docket USTR–2019–0004 at regulations.gov, and written comments are due June 17, the same day the hearings are set to begin. Post-hearing rebuttal comments are due seven days after the hearings end.

Walmart is working with suppliers to manage pricing after the Trump administration hiked Section 301 tariffs to 25 percent last week on $200 billion worth of Chinese goods (see 1905090018), said Chief Financial Officer Brett Biggs on a fiscal Q1 earnings call Thursday. Increased tariffs “will increase prices for customers,” said Biggs. With the administration's threat Monday to impose 25 percent tariffs on Chinese imports not previously dutied in the Section 301 investigation (see 1905140025), Walmart will monitor any upcoming U.S.-China trade talks, and is “hopeful that an agreement can be reached” to avert imposition of the fourth tranche of tariffs, said Biggs. Walmart's goal “is to always be the low-priced leader, and we will actively manage pricing and margins as warranted with our customers and shareholders in mind.” Walmart's supply-chain teams are focused on “executing appropriate mitigation strategies,” including possibly sourcing goods from alternative countries of origin, he said. In Q1, Walmart revenues rose 1 percent vs. a year ago to $123.9 billion, tempered by currency headwinds, the company said. Walmart U.S. Q1 revenues were $80.38 billion. Traffic in U.S. stores, now called transactions, rose 1.1 percent, Walmart said, while Q1 tickets grew 2.3 percent over the year-ago quarter. E-commerce sales were “robust,” at 37 percent growth, and contributed 140 basis points to the U.S. segment’s comp sales increase, said Biggs. From Q1 forward, Walmart is including e-commerce transactions that were previously reported in the “ticket” category as “comp transactions,” Biggs said, encompassing in-store, clubs and e-commerce businesses. CE products weren't referenced among categories highlighted for contributing to Walmart U.S.’ 3.4 percent comparative sales bump in Q1, but toys and “wireless” were highlighted in the company’s earnings presentation. The company also credited momentum in food and consumables, pharmacy sales that benefited from “branded drug inflation,” Easter, home and lawn, and garden sales for its “highest Q1 comp in nine years.” In the quarter, the company announced new goals to support recycling in its private brands packaging in Walmart U.S., Canada and Mexico, as part of broader plastic waste reduction goals, said CEO Doug McMillon. Goals include making private brand packaging 100 percent recyclable, reusable or industrially compostable by 2025, to have 20 percent recycled content in its packaging, and making it easier for customers to recycle by including “customer-friendly” labeling on product packaging; Walmart is challenging branded suppliers to set similar targets, he said.

Though allegations that China’s “retreat” from previous commitments in the trade talks were the Trump administration’s grounds for hiking the List 3 Section 301 tariffs to 25 percent (see 1905080023) and proposing a fourth tranche of duties on remaining Chinese imports not previously dutied (see 1905140025), it was the U.S. side that actually reneged, suggested a Chinese Foreign Affairs Ministry spokesperson Thursday. “It takes sincerity to make a consultation meaningful,” said the spokesperson. “Judging from what the U.S. did in previous talks, there are two things we have to make clear,” he said. “First, we need to follow the principle of mutual respect, equality and mutual benefit. Second, words must be matched with deeds. Flip-flopping is the last thing we need.” During the various rounds of trade negotiations, the U.S. “repeatedly rejected rules in consultations and brought difficulties to the talks, while China, on the other hand, has been acting in a constructive spirit all along,” he said. “The international community bears witness to all this.” The Office of the U.S. Trade Representative didn’t comment Thursday.

U.S.-China trade talks “put Alibaba on the right side of all the issues on the table,” said Executive Vice Chairman Joseph Tsai on a fiscal Q4 earnings call Wednesday. Calling the trade war the big “elephant in the room,” Tsai spoke as if a comprehensive trade accord was already done. China’s “commitment to purchase more American products” means it will become a “net importing country,” reducing the U.S.-Chinese trade imbalance, he said. The Chinese e-commerce giant is "not concerned about slowing China exports affecting GDP growth because the Chinese economy is shifting from an export economy to a domestic consumption economy,” he said. "The middle class in China has reached critical mass of over 300 million, almost as large as the entire U.S. population," said Tsai. "The middle class will double in the next 10 years, especially from the lesser-developed Chinese cities. While total Chinese domestic consumption is $5.5 trillion today, consumption from these third-, fourth-, and fifth-tier cities, with a combined population of 500 million people, will triple from $2.3 trillion to nearly $7 trillion in the next 10 years." China in recent years also has made "significant improvements in reducing" intellectual-property theft, as it "moves closer to global norms in protecting and paying for foreign IP," he said. Any trade accord with the U.S. will help further that goal, he said. “The vexing issues in the trade negotiations will resolve themselves, as the Chinese economy is already evolving to close the gap between the interests of the United States and China.”

U.S. importers whose Chinese goods were on the water when the List 3 Section 301 tariffs went up to 25 percent early Friday can assign their goods a special new 9903.88.09 heading on the Harmonized Tariff Schedule to enter at the old 10 percent duty rate, said the U.S. Trade Representative Thursday night. This obviates importers needing to pay the 25 percent duty at ports of entry and then seek refunds, under Customs and Border Protection's “in the meantime” guidance earlier Thursday (see report in the May 10 issue). Goods bearing the special HTS heading need to enter the U.S. on or before June 1 to qualify, said USTR. CBP will issue “instructions on entry guidance and implementation,” it said.

The International Trade Commission seeks comment by May 10 on a Rovi complaint seeking a ban on import of Comcast X1 digital video receivers based on infringement of a group of Rovi’s patents, said Thursday's Federal Register. The April 27 Tariff Act Section 337 complaint is the third Rovi has filed against Comcast’s X1 set-top boxes, with one having resulted in an exclusion order and another forming the basis for an ongoing Section 337 investigation. Rovi seeks a limited exclusion order and cease and desist orders banning import and sale of set-top boxes that infringe this third set of patents. “Rovi launched this campaign in April 2016 by asserting infringement of 15 patents -- 14 of which have been held to be invalid and/or not infringed by Comcast, or have been withdrawn by Rovi,” said a Comcast statement Thursday. “We will continue to defend ourselves against allegations we determine to be meritless.”

U.S. Trade Representative Robert Lighthizer will bow to congressional pressure and launch a product exclusion process this month for the third tranche of 10 percent tariffs on Chinese imports. So said Lighthizer in a written reply to Rep. Suzan DelBene, D-Wash., after his Feb. 27 appearance before the House Ways and Means Committee (see 1902270047) where he acknowledged broad congressional support for the List 3 exclusion process. “I have stated in my testimony before the Committee, and in correspondence with individual Members of Congress, that USTR would initiate an appropriate exclusion process for List 3 if the duty rate on those tariffs were raised to 25 percent,” he told DelBene. “Members of Congress believe that we should have an exclusion process for List 3. For this reason, we have begun preparations to launch a process by the end of the month.” The “devaluation of the Chinese currency” since List 3 took effect Sept. 24 lessened the cost impact to importers of the 10 percent tariffs, Lighthizer told the Ways and Means hearing as his rationale for not wanting a List 3 exclusion process unless the duties rose to 25 percent. President Donald Trump in February postponed the List 3 tariff increase indefinitely (see 1902250001).

Congress should “ratify” the U.S.-Mexico-Canada Agreement on free trade and “strengthen our nation’s security,” said a full-page CTA ad in Tuesday's Washington Post. USMCA would boost America’s “physical security by aligning with our closest allies,” said the full-color ad, on the back page of the Post's A section. It would protect “our economic security by avoiding high tariffs, protecting American companies and encouraging good jobs,” it said. “Technology creates new jobs and helps drive the U.S. economy,” said President Gary Shapiro. “USMCA reduces barriers to digital trade, eliminates technical barriers to trade and promotes America's online platforms. Congress needs to make passing USMCA a top priority." Days earlier, CTA joined with nearly a dozen other tech groups urging the House Ways and Means and Senate Finance Committee leadership to approve USMCA “quickly” (see 1904290191).