China Responds to Latest U.S. Tariffs

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China Responds to Latest U.S. Tariffs

Author:

14-May-19

China Responds to Latest U.S. Tariffs

In response to the latest U.S. tariff increases on $200 billion worth of goods moving from China to the U.S. the Chinese government has announced further retaliatory tariffs on U.S. goods exported to China. The new tariffs will apply to $60 billion worth of U.S. origin products and will take effect on June 1st.

The tariff increases on imports to China cover over 5,000 different tariff line items and the amount of increases range from 5% to 15% depending on the classification. These increases will raise tariffs to a total of 25% on about half the 5,000 items covered.

Similar to the U.S., the Chinese have also announced a pilot project to provide for Chinese importers to request exclusions from tariffs which seems to mirror in some ways the U.S. process for exclusions. Information is still being developed but their criteria seems to be quite similar in that it considers whether there are non-U.S. sources for the product, how damaging the tariffs are to the importer requesting the exclusion and the structural impact of the tariffs on relevant industries. Also, if granted, the exclusions will be for a one year term. U.S. exporters should inquire with their customers to make sure they are aware of this and taking any appropriate action if possible.

Unfortunately there has not been much progress in talks between the U.S. and China to resolve trade differences. There was some hope that tariffs would be decreased as a result of recent negotiations but now the trade war seems to have escalated. Both sides publicly indicate a desire to come to some agreement but there has been no scheduled follow up meetings planned since unsuccessful discussions in Washington last week.

In another ominous development the U.S. Trade Representative announced it was taking steps to prepare for additional tariffs on all other Chinese imports not yet affected by the trade war. This does not mean it will happen but once this groundwork has been laid it will become easier to take a quick executive action to implement. This would involve another $300 billion worth of Chinese imports coming to the U.S.

We will continue to monitor and keep you advised of further developments.