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July 17, 2018

Update on China Tariffs Amid Escalating Trade Dispute

By: Mike Wilson and Lindsey Roskopf

Last week, the Trump Administration released a new list of Chinese-made goods that will be subject to a 10% tariff, signifying yet another salvo in the escalating trade dispute between the U.S. and China.  This new list identifies thousands of Chinese products – including food, consumer goods, tobacco, chemicals, coal, steel and aluminum – representing an approximate annual trade value of $200 billion.

The additional proposed tariffs come as part of the U.S. Trade Representative’s (USTR) investigation under Section 301 of the Trade Act of 1974, which authorizes the imposition of trade sanctions on foreign countries that engage in unfair trade practices.  The new tariffs will be in addition to the 25% tariffs the U.S. recently imposed as part of that investigation.  The USTR announced the new 10% tariffs following China’s recent implementation of retaliatory tariffs on approximately $34 billion worth of U.S. exports.

Below is a brief synopsis of the current state of the escalating trade dispute with China.

USTR Imposes 25% Tariffs on $50 Billion Worth of Chinese Imports

On March 22, 2018, President Trump announced a sweeping new trade action – which at the time he called “the first of many” – to increase tariffs on Chinese goods as a result of unfair practices that may be harming U.S. intellectual property rights, innovation and technology development.  The move resulted from the USTR’s Section 301 investigation, which found that China uses foreign ownership restrictions, licensing policies and limitations on U.S. investment to pressure transfers of U.S. technologies to China.  The USTR also found that China conducts and supports unauthorized intrusions into, and theft from, U.S.-based computer networks. 

President Trump directed the USTR to announce the imposition of an additional duty of 25% on approximately $50 billion worth of Chinese imports as part of the U.S. response to China’s unfair trade practices.  On June 15, 2018, the USTR released two lists of Chinese products that will be subject to these additional 25% duties.

CBP began collecting the first set of tariffs, which include 818 U.S. tariff lines covering approximately $34 billion worth of Chinese imports, on July 6, 2018.  The second set of tariffs, on 284 proposed tariff lines covering an additional $16 billion worth of Chinese imports, is still under further review in the public notice and comment process, and thus have not yet begun to be enforced.

China’s Response to Initial U.S. Tariffs

Rather than address the unfair trade practices identified by the Section 301 investigation, China responded by imposing retaliatory tariffs on U.S exports to China.  On June 15, 2018, China announced that it would impose an additional 25% tariff on U.S. goods with an approximate value of $50 billion.  Like the U.S., China issued two lists, the first of which contained 545 tariff subheadings and covered approximately $34 billion in U.S. exports and became effective on July 6, 2018.  The second list (containing 114 tariff subheadings) covers a proposed $16 billion in U.S. exports, and will be effective on a date to be determined.

USTR Proposes Additional 10% Tariff on $200 Billion in Chinese Imports

As discussed above, the USTR proposed an additional 10% ad valorem duty on Chinese products last week in light of China’s retaliatory response to the initial 25% tariffs, and its failure to change the acts and trade practices identified in the Section 301 investigation.  The additional tariffs cover 6,031 tariff subheadings and an estimated annual trade value of approximately $200 billion.  The USTR has stated that the products targeted by the tariffs are those that benefit China’s industrial policy and forced technology transfer practices.

The USTR is currently accepting comments from interested persons with respect to these proposed new tariffs.  Written comments must be submitted by August 17, 2018.  A public hearing will be held on August 20, 2018.  Post-hearing rebuttal comments must be submitted by August 30, 2018.  More information about how to submit comments can be found here.