Anyone interested in international trade would do well to consider and watch closely several major actions which have recently occurred in Washington involving international trade. Last week the Trump administration announced the imposition of significant duty increases on the importation of steel and aluminum tariffs. This has shaken not only our domestic stock markets but also our trading partners throughout the world. This action has many concerned for several reasons. First, importers of steel and aluminum will obviously see increased costs that will have to be passed on to their customers. This could have profound affect on all products containing steel or aluminum. How many products and how much increase will ultimately be born by consumers is not yet clear.
Additionally, it has brought fears of retaliation from around the globe which could be the start of a trade war as countries consider reactions and potential of a tit for tat game. The good news for free traders is that these tariff increases have already been delayed for several major trading partners (Canada, Mexico, Australia, Argentina, South Korea and Brazil. Also temporarily exempted from these increases are 26 countries of the European Union, at least until April 30,2018. It is noteworthy that Japan, a major trading partner, is not on the exemption list.
In a separate presidential action the U.S. Trade Representative has been directed to take "all appropriate action" to address what is deemed as"unreasonable or discriminatory acts, policies and practices" which appears to mean that there will be more tariff increases with respect to goods coming from China. Details on this are still forthcoming but China has already indicated there will be a retaliatory response. The products involved in new U.S. tariffs should be the subject of notice with an opportunity to give input by domestic stakeholders. This also raises the specter of a possible snowballing trade war which could impact a variety of products and industries in both the U.S. and China.
Finally, for some good news, the spending bill passed last week by Congress and signed by President Trump included a provision to renew the Generalized System of Preferences (GSP). This will be welcome news to many importers and includes a provision making the approval retroactive to December 31, 2017 when it expired. This renewal has been authorized through December 31, 2020. We are awaiting a formal message from Customs and Border Protection advising when its programming is updated and what the process will be for filing for refunds. We will be watching for this and take action to obtain refunds for all entries flagged since the first of the year which are eligible for GSP treatment.
It is said there are no winners in trade wars and we hope this will not be the result of recent actions. It is difficult to predict and retaliations could be far-reaching. We will be monitoring the implementation of all three actions and will keep you informed of further developments. Please feel free to contact us with any questions.