China tariffs set to ramp up

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Publication October 23, 2018

US tariffs on many Chinese imports will increase automatically on January 1, unless any meeting between the US and Chinese presidents on the sidelines of the G-20 summit in Argentina in late November can diffuse trade tensions.

The United States has imposed three rounds of tariffs on Chinese products, and a fourth round is threatened on top of automatic tariff increases that have already been set in motion.

The US started collecting a 25% tariff on July 6 on a list of Chinese goods that accounted for $34 billion in imports last year. The $34 billion in products include “wind-powered electric generating sets” falling under HTSUS (tariff classification) 8502.21.00, electrical transformers, electrical capacitors, circuit breakers, electrical switching apparatus, machine tools, industrial robots, ball bearings, gears, and DC and AC generators. 

A 25% tariff took effect on August 24 on another 281 categories of Chinese products worth $16 billion, including iron and steel products, machinery, motors, electrical meters, insulated electric conductors, solar inverters and voltage regulators. 

A 10% tariff took effect on September 24 on another 5,745 categories of Chinese products that accounted $200 billion in US imports last year. The tariff on these products will increase to 25% on January 1 unless the Chinese take action to reduce their trade deficit with the United States and address US complaints about technology transfers and intellectual property. The $200 billion list includes more Chinese iron and steel products, rubber, copper, zinc, nickel, lead, cobalt, more electrical transformers, various types of batteries, carbon electrodes, electrical insulators, electrical conduit tubing and various electrical machinery parts. 

Chinese exports to the US in 2017 were $506 billion. The US is currently collecting duties on $250 billion. President Trump threatened in separate interviews in July to subject another $200 billion in Chinese products, and then all remaining products, to duties, but no list has been released yet. At some point soon, what is on the list will cease to matter if close to all Chinese products are covered. 

China announced new tariffs on $60 billion of goods from the US levied at 5% or 10%, effective September 2, including honey, LNG and smoked salmon. 

The Chinese renminbi has dropped nearly 10% in value since March against the US dollar, negating some of the effects of the US tariffs. The dollar has been strengthening against all currencies. 

Separately, the US Department of Commerce announced changes in mid-September in how it processes applications from US importers for relief from a 25% tariff on steel imports and 10% tariff on aluminum that apply to imports from virtually all countries. 

The process was a mess. Commerce requires a separate five-page form be filed by each importer for each individual product for which an exemption is sought. Thus, for example, if one importer wants exemptions for five products, it must file five separate applications. Trade associations are not allowed to apply for whole industries. An exemption granted to importer A on product X does not allow importer B to import the same product duty free. B would have to apply for its own exemption. 

Commerce was expecting to receive 4,500 exemption requests for steel and 1,500 for aluminum. Instead, it received more than 38,000. 

Senator Pat Toomey (R-Pennsylvania) said in a letter to Commerce Secretary Wilbur Ross that 2,900 requests had been handled as of August 23 when Toomey wrote the letter. Toomey listed 37 Pennsylvania companies he said are being harmed by the tariffs and need decisions about exemption requests that they or their suppliers filed. He said several of the companies were still waiting after he wrote about them four months earlier. He called the exclusion process “inefficient and unnecessarily burdensome” and said the tariffs are “taxes” imposed “under the false pretext of national security.” Some steel and aluminum companies whom the tariffs are intended to help are in Pennsylvania. 

Meanwhile, the US Trade Representative’s office announced in a Federal Register notice on September 19 that it will exclude certain types of solar panels and cells from a 30% tariff the US started collecting on imported solar modules and cells on February 7. The exclusions cover a range of modules and cells used in smaller applications, including interdigitated back contact (IBC) solar modules and cells made by SunPower. 

The USTR said it received 48 product exclusion requests and 213 subsequent comments about them. Decisions have not been made about other products. 

For more detail about US duties, see “US Solar Tariffs” in the February 2018 Newswire, “Tariffs: Effect on US Power Sector” in the April 2018 Newswire, “Tariff Threats” in the June 2018 Newswire and “US Import Tariffs Remain a Challenge” in the August 2018 Newswire.


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