June 27, 2018

On June 15, President Trump issued a statement that the United States will implement a 25 percent tariff on $50 billion worth of Chinese goods that contain industrially significant technology. Following, the Office of the U.S. Trade Representative (USTR) formally released one list of products (list 1) worth $34 billion upon which a 25 percent tariff will be levied by Customs and Border Protection (CPB) starting July 6 (if an agreement is not otherwise reached beforehand). 

While this is unfortunate news, there is a silver lining – all products in Chapters 28, 29 and 30 have been deleted from the list, i.e. the pharmaceutical and pigment chemical intermediates that SOCMA requested be delisted in comments and testimony were in fact delisted. List 1 includes 818 lines of the original 1,333 lines that were included on the proposed list published on April 6. USTR also released a second proposed list of products (list 2). List 2 contains 284 proposed tariff lines identified by the interagency Section 301 Committee as benefiting from Chinese industrial policies, including the “Made in China 2025” industrial policy.  These 284 lines, which cover approximately $16 billion worth of imports from China, will undergo further review in a public notice and comment process, including a public hearing. List 2 includes products not previously identified, such as high-tech machinery and equipment used in electronics and plastics (petrochemicals) and lubricating oils. 

The Chinese on Friday responded by assuring reciprocity and releasing a list of U.S. goods worth $34 billion slated for 25 percent tariffs. This Chinese retaliatory list includes numerous chemical products (other products include farm products, cars and crude oil). While the implementation date for farm products and other goods is July 6, the date of implementation for listed chemicals has not yet been announced. 

In response, President Trump on Monday directed USTR to identify an additional $200 billion worth of Chinese goods to be subject to a 10 percent tariff if China retaliates for the 25 percent tariffs announced last week. In the statement, President Trump noted, “I have an excellent relationship with President Xi, and we will continue working together on many issues. But the United States will no longer be taken advantage of on trade by China and other countries in the world.” While the phone lines remain open, there is no indication yet that such talks are on the horizon. 

Chinese government officials then threatened to match the initial U.S. tariffs dollar-for-dollar and impose tariffs on the same day that the U.S. acts. Beijing gave less details than in the past as to how China would retaliate. 

Following, President Trump responded by threatening a 10 percent tariff on another $200 billion worth of Chinese goods if the Chinese retaliate, bringing the total threatened amount to $450 billion worth of Chinese goods. Beijing may be vulnerable because China’s room to retaliate is limited by the fact that China exports far more merchandise to the U.S. than the U.S. sends to China. Last year, the U.S. exported goods worth $129.9 billion to China while China sent merchandise worth 505.5 billion to the U.S ($375 billion more). While China cannot match such tariff threats, Beijing has threatened “comprehensive measures,” raising the possibility China may pursue non-tariff strategies and target operations of American companies.

For more information, contact Matt Moedritzer, Manager of Legal and Government Relations. 

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