Trade War

Last week, the United States Trade Representative (USTR) announced the next steps in the process of imposing an additional tariff of 10 percent on approximately $300 billion of Chinese imports. In doing so, he offered a reprieve for some goods just in time for the Holidays. But you better stock up before December 15. This trade war just keeps getting interesting.

This latest round started on May 17, 2019, when USTR published a list (List 4) of products imported from China that would be potentially subject to an additional 10 percent tariff.

This new tariff for some of those goods will go into effect on September 1, as announced by President Trump on August 1 (List 4A). List 4A includes products for which China’s share of U.S. imports from the world is less than 75 percent.

The list of tariffs going into effect in September is 122 pages long and is valued at $110 billion, covering everything from the strange and dangerous—like “saps and extracts of opium” to “muffin ovens” and “tanks and other armored fighting vehicles”—to “men’s and boy’s suits, knitted or crocheted.” There is also the mundane, such as used and new rags, pipes, pins, and pacifiers made from a range of materials. Also, get your canoe paddles and compression socks right away. And just a warning, for those in need of a live camel, Chinese processed American cheese, or gouda cheese, the days to place a tariff-free order are short.

USTR also claims, as part of USTR’s public comment and hearing process, that the tariff should be delayed to December 15 for certain other products (List 4B). List 4B includes products for which China’s share of U.S. imports from the world is 75 percent or greater. The reason stated in the record for the delay of the tariff being imposed is to provide a longer adjustment period for “U.S. interested” persons. Supposedly, because it is where we get most of these goods, or at least 75% of them, so would be harder for us “U.S, interested” folks to replace from elsewhere. That being said, what the President said in a tweet was that it was really to allow for the holiday shopping season to mostly be done without the burden of a tariff on these goods. And of course, the real reason was the stock market tanked when the imposition of tariffs were announced, so the tariff on Iphones and the like were delayed.

Just to show you how crazy this whole thing is, the market reacted positively to the delay, even though tariffs of $110 billion are still going into effect in a little over two weeks. In fact, 69% of consumer goods will be subject to the new tariff on September 1, up from 29% currently. I guess good news is relative.

December’s list is much shorter, but obviously more valuable. Only 21 pages, so a much smaller list, yet it is valued at $160 billion. it includes pet toys, pencil sharpeners, umbrellas, and natural pearls (cultured pearls, along with rubies, diamonds and sapphires, will be tariffed in September). As mentioned, products also in this group include, cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing all prime items for holiday gifts.

And finally there was a short list of products proposed for List 4, that have been removed based on health, safety, national security, and other factors and will not face additional tariffs of 10 percent. This is good news for those worried they may have to shell out more for their Bibles, radioactive elements, and frozen salmon.

Unlike the process utilized for List 3 when USTR imposed a 10 percent tariff and did not provide an exclusion process until the tariff was increased to 25 percent, USTR announced its intention to conduct an exclusion process for these products subject to List 4’s 10 percent tariff. They said that they will publish a separate notice describing the product exclusion process, including the procedures for submitting exclusion requests, and an opportunity for interested persons to submit oppositions to a request. They also went on to say that, in the event that further modifications are appropriate, the Trade Representative intends to take into account the extensive public comments and testimony previously provided in response to the May 17 notice.

List 4A (Effective September 1, 2019)

List 4B (Effective December 15, 2019)

Notice of Modification (List 4A and List 4B) – August 14, 2019

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