October 29, 2018

More Tariffs May Be on the Horizon

Casie Daugherty

This afternoon, Bloomberg released a report that the next list of products the Trump Administration will target with tariffs could be coming in the near future.

This report follows an additional further complication to the American-Chinese trade relationship, with the decision by the Department of Commerce today to place Chinese semiconductor company Fujian Jinhua Integrated Circuit Company, Ltd. on the Entity List, thus restricting their exports and their ability to have access to American technology and components. The Commerce Department cited Jinhua as a “significant risk of becoming involved in activities that are contrary to the national security interests of the United States.” Because of this action, Jinhua will have to obtain a license for all “exports, re-exports, and transfers of commodities, software and technology subject to the EAR.”

Bloomberg’s reporting links a decision on whether to release such a list with the success or failure of the meeting between President Trump and President Xi of China at the G20 Summit, which is scheduled for November 30 and December 1 – though Chinese media reports have indicated that a meeting will take place the day before the Summit (November 29).

While the Trump-Xi meeting has been billed for weeks as a possible turning point for the trading relationship between the two countries, it remains unclear as to what precisely the U.S. would accept as “wins” in order to put off releasing another round of tariffs, with some officials downplaying the likelihood of significant breakthroughs. Since the first round of tariffs began earlier this year, Trump Administration officials have been insistent that Chinese leaders know exactly what is required in order for the U.S. to remove the existing tariffs. However, many of the U.S. demands extend to structural changes within the Chinese economy that will not be easily (or quickly) addressed. Additionally, in earlier discussions, the Trump Administration has indicated that simply agreeing to changes would not be enough – actual changes through verifiable actions would be necessary for any changes to American policy.

This fourth list of tariffs, which the Administration has been threatening to release for months, likely would include all of the products imported from China that have (so far) escaped tariffs in the previous three lists. It would hit around $257 billion in Chinese imports and would include a wide variety of consumer products, including clothing, toys, and electronics. Although previous lists had included some goods that the average American would buy (and potentially notice a price increase on), this list would significantly increase the number – thus increasing the likelihood that American consumers would be hit with higher prices on goods that they use most frequently.

Adding further tariffs may also continue (or grow) the effects on the overall economy. In addition to several high-profile companies last week that cited tariffs as a significant impact on their quarterly earnings reports, the Commerce Department’s own report indicates that trade had a significant negative impact on U.S. GDP in the third quarter. According to the Bureau of Economic Analysis, the “net exports of goods and services” had a -1.78% impact on GDP last quarter, the largest in 33 years according to Business Insider.

Casie Daugherty

Casie helps to lead the firm’s trade practice, where she covers client needs in relation to NAFTA, tariff action, CFIUS, and other trade-related actions.