Section 301 — The U.S. Imposes Additional Duties on ~$200 Billion Worth of Chinese-Origin Imports

Dear Friends,

President Trump announced today that the United States would be moving ahead to impose additional duties on a further $200 billion worth of Chinese-origin imports (referred to as ’List 3’).  According to the announcement, the additional duties will start at 10% and run through the end of the year.  If the matter has not been resolved satisfactorily by then, the rate will be increased to 25% on January 1, 2019.  The additional duties will become effective next Monday, September 24, 2018.  A copy of the Statement from the President is attached for your reference: 

The additional duties will apply to Chinese-origin goods classified in the tariff subheadings included on the final list.  This list has not been published yet, but, given the effective date (a week from now), it is expected in the next day or two.  The Section 301 Committee has been considering the comments and testimony received on the list of 6,031 tariff subheadings originally proposed for List 3.  It is being reported that a relatively small number of tariff subheadings (a few hundred) are being removed from the final list as a result of this process.

Once the final List 3 is published, it is widely expected that China will retaliate by imposing additional duties on a list of U.S.-origin products worth approximately $60 billion.  It is also being reported that China may decline any invitation issued by the United States to begin negotiations until after the midterm elections and/or may engage other levers domestically to squeeze U.S. companies doing business in China.

If China does retaliate, the President’s statement says that the Administration “will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”  This would be List 4 and it would cover all of the remaining imports from China.

This is the latest (and undoubtedly not the last) salvo in the on-going trade war between the United States and China.  Unfortunately, it is hard to view this salvo as being effective.  Rather than force the parties to the table, an additional 10% duty is arguably offset by the declining value of the yuan (which is down high single-digit percentages in a year) and is likely going to be viewed as a sign of wavering resolve from a president in a contentious midterm election year.  In short, today’s announcement will likely prolong the trade war, rather than help bring it to a speedy conclusion (which, in all fairness, may be the plan after all – if the war drags on long enough, companies will start to leave the war zone . . .).

We hope this is helpful.  If you have any questions about the Section 301 duties (or China’s retaliation), please let us know.

Best regards,

Ted

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