As the trade war between United States and China drags into its second year, a resolution does not appear to be in the near future. In fact, following the most recent wave of escalations, the US stock market plummeted over 600 points leading into Monday, May 13.

While the trade war continues, neither side seems ready to reconcile. In early May, the two parties came close to a consensus. According to President Trump, China backed out of the deal, re-igniting tensions. In response to China reneging on the tentative agreement, President Trump called for an additional 25% tariff increase on Chinese Products on List 3.

China’s Retaliatory Tariffs

In response to the US’ call for an increase from 10% to 25% on Chinese goods for list 3, China announced their own increase. China’s proposes tariffs on over $60 billion in US goods will go into effect June 1, assuming negotiations remain stagnant. 

China breaks down the new proposition into four separate lists. According to China’s Ministry of Finance of the People’s Republic, the first list of roughly 2500 items would be subjected to a 25% tariff. The 1078 items in Annex 2, shall experience a 20% tariff increase; the 974 items of list 3 (Annex 3) shall undergo a 10% tariff, and the 595 items in Annex 4 would be subjected to a 5% tariff. Chinese list subjects over 5,000 US goods to tariffs as high as 25%.

U.S. Stands Ready to Strike Back

Considering the trade war essentially began over competition in technological industries, undermined by China’s abhorrent and blatant disregard for international trading norms, relating to intellectual property rights and narrowed to combat China’s Made in China 2025 plan, previous lists focused specifically on modern industries.

However, The newly proposed list of goods, however, slaps a 25% tariff on roughly 300 billion worth of goods. From food products to furniture, the proposed list would include “essentially all products not currently covered” under previously imposed lists including literally thousands of irrelevant goods.

According to USTR, the new list does not affect any good that already obtained an exemption from prior rounds, such as many medical products, as well as pharmaceuticals.

Interested in Submitting a Comment to Let USTR know Why Your Goods Shouldn’t be on the New List?

(USTR) is seeking public comment and will hold a public hearing regarding this proposed modification of the new list. Below are important deadlines to consider:

• June 10, 2019: Due date for filing requests to appear and a summary of expected testimony at the public hearing.
• June 17, 2019: Due date for submission of written comments.
• June 17, 2019: The Section 301 Committee will convene a public hearing in the main hearing room of the U.S. International

USTR requests comments with respect to any aspect of the proposed action, including:

• The specific tariff subheadings to be subject to increased duties, including whether the subheadings listed in the Annex should be retained or removed, or whether subheadings not currently on the list should be added.
• The level of the increase, if any, in the rate of duty.
• The appropriate aggregate level of trade to be covered by additional duties.

While the president attempts to place America’s interests first, the new list (along with the other lists) appears to afflict the very constituents he intends to protect. In addition to the list’s over-inclusion of non-intellectual property, many of the most affected businesses happen to be small and medium sized business.

Trump tells American companies to produce in the US in order to avoid hefty tariffs. Not only do these companies face illegal and unfair practices from their Chinese counterparts, but they also must cope with the tariffs levied on US imports. At the same time, many large companies, have greater means to either negotiate with their suppliers (while SME’s don’t) or pass the tariff costs to their customers. We encourage all parties impacted to provide comments to the USTR to have your voice heard, and fight to have your product excluded from the new list.

For background information on China Tariffs and numerous ways to mitigate the effect of the China tariffs, check out our previous blogs. Diaz Trade Law has assisted clients in assessing their best options to prepare or mitigate the China tariffs and submitted comments and exclusions. Our Customs and International Law attorneys are available at 305-456-3830 or info@diaztradelaw.com.