Tracking Tariffs and Trade
Prime Policy Group’s trade team will be providing frequent updates on the latest news in trade policy. If you wish to receive more emails like this one, please email firstname.lastname@example.org to be added to our list.
April 30, 2018
The Trump Administration will grant a one-month extension to countries that were initially given temporary exemptions from the steel and aluminum tariffs.
Canada, Mexico and the countries within the European Union will now have until June 1 to finalize a deal for a permanent tariff exemption.
The extension gives the U.S., Mexico, and Canada time to come to an agreement on NAFTA modifications, which President Trump has previously stated would be a requirement for a permanent exemption.
Additionally, South Korea, which was originally granted a temporary exemption, will sees its exemption made permanent, thanks to the agreement between the U.S. and South Korea to make minor changes to the KORUS Free Trade Agreement.
The White House also announced that it had reached agreements in principle with Argentina, Australia, and Brazil to address steel and aluminum imports, which will allow those countries to also be permanently exempt. Details of those agreements are likely to be finalized in the coming days and weeks and will be announced by USTR.
April 5, 2018
In a move that should not come as a surprise to those that have observed trade and tariff action during the Trump Administration, a short time ago President Trump instructed USTR to investigate whether it would be appropriate to levy $100 billion in additional tariffs on Chinese products imported into the United States. This $100 billion would not include the already announced $50 billion in tariffs levied as a result of the Section 301 investigation.
In making this announcement, the White House drew a direct connection between these potential additional tariffs and the Chinese action on Wednesday to hit $50 billion in American goods with 25% tariffs.
While the announcement mentions that the Chinese tariffs on products from the U.S. will “harm our farmers and manufacturers,” it makes no mention on how adding additional tariffs to Chinese products, as well as the Chinese retaliation that will likely follow, wouldn’t exacerbate this harm.
In a statement released by USTR, Ambassador Lighthizer called these potential new tariffs “appropriate,” and said that any such tariffs would go through a similar public comment period that is currently underway for the $50 billion in Chinese products.
This tariff announcement comes after Administration officials have spent the last several days trying to soft pedal the original tariff announcement, with new NEC head Larry Kudlow saying that the list was just a “proposal” and may not even take effect. Even if these announcements are just negotiating tactics, as Kudlow stated, it seems unlikely that they won’t have an economic effect- immediately after this evening’s announcement, the Dow Future’s market was down more than 400 points.
April 4, 2018
As we predicted yesterday, the Chinese government was quick to respond to USTR’s list of goods that would be subject to higher tariffs due to the findings of the Administration’s Section 301 Investigation.
The Chinese government announced that it would place 25% tariffs on approximately $50 billion in imported American goods, effecting 106 products.
Among the products that will be impacted include soybeans ($12.3 billion in exports in 2017); new and used passenger cars ($10.5 billion in exports in 2017); and aircraft and related aviation products ($16.3 billion in exports in 2017). In this round of tariffs, U.S. agricultural and farming products were hit especially hard, with products such as cranberries, beef, tobacco, corn, and cotton included.
April 3, 2018
- April 23: Due date for filing requests to appear and a summary of testimony for the public hearing
- May 11: Written comments due
- May 15: Section 301 Committee public hearing
- May 22: Due date for submission of post-hearing rebuttal comments
This USTR list comes the day after China imposed tariffs on 128 U.S. products in response to U.S. tariffs on steel and aluminum. It is likely that the Chinese government will now announce further tariffs in response to these tariffs, which total approximately $50 billion in imported products.
April 1, 2018
Late Sunday night, the Chinese government announced that it would follow through with its threat of placing tariffs on American goods in response to the steel and aluminum tariffs levied by the United States.
These Chinese tariffs will go into effect on Monday, April 2.
The announced tariffs will cover 128 products imported from the United States, and the covered products appear to match a list released by the Chinese government on March 23 that totals $3 billion.
120 products, including fruits, nuts, ethanol, and wine, will be subject to a 15% tariff. However, pork and seven other products will be subject to a 25% tariff. China is the third largest market for American pork.
The announcement comes as the United States Trade Representative is expected to release a list of Chinese goods this week that the Trump Administration will target with tariffs as a result of the section 301 investigation. Those tariffs are expected to cover between $50 billion and $60 billion in imported products.
March 27, 2018
The United States and South Korea have reached an agreement in principle to amend the free trade agreement between the two countries, which is commonly referred to as KORUS.
Because the United States chose to negotiate outside of the congressionally-regulated Trade Promotion Authority (TPA), any changes made to the agreement cannot require changes to law or implementing language.
Below are the highlights of the agreed upon changes.
- U.S. Truck Tariffs (25%) will continue until 2041. They were scheduled to end this year.
- Doubles the cap (from 25,000 to 50,000) per manufacturer per year for U.S. automobiles imported into South Korea that utilize U.S. safety standards
- Eliminate burdensome regulations, including additional environmental testing in Korea
- Aligning Korean vehicle testing standards with the U.S.
- Korean recognition of U.S. standards for auto parts needed to service imported U.S. vehicles
- Improvements to CAFE and ECO standards & take U.S. regulations into account and setting standards
- Improvement in Korean custom inspections at the border; they also established a working group to monitor
- The pharmaceutical reimbursement will now apply to American companies; Korea will amend their premium pricing in 2018
- Subject 232: Korea will be subject to the Aluminum tariff. However, on the steel tariff, they will just be subject to a hard quota that is product-specific (70% of the average annual export volume), which will result in about 30% reduction in imports
- Currency Manipulation: There will be a side agreement between the U.S. Treasury Department and the Korean Ministry of Strategy & Finance. It will focus on prohibiting competitive devaluation & ensure commitments on transparency and accountability. It will not be subject to ISDS. Notably, the currency manipulation agreement is not enforceable.
March 22, 2018- Update 3
- South Korea
- Members of the European Union
Interestingly, this action means that four of the top five countries who export steel into the United States are now exempt from the tariffs.
Additionally, it is important to note that other countries, such as Japan, that had been floated as possibly receiving exemptions from the tariffs were left off of the final list.
March 22, 2018- Update 2
In the first sign of what could be escalating trade actions, China announced its plan to hit back at U.S. products imported into the country. The move is in response to the Trump Administration’s decision to levy tariffs on approximately $60 billion worth of Chinese imports.
The goods targeted by the Chinese, which total about $3 billion, fall into seven categories and are comprised of 128 separate products. 120 of these products (around $977 million worth) will be hit with a 15% tariff.
According to the release these will include:
- Fresh Fruit
- Dried Fruit and Nut Products
- Seamless Steel Pipes
- Modified Ethanol
- American Ginseng.
A second set of goods will face a 25% tariff. They include recycled aluminum, pork and processed products.
The complete list of proposed items to be included in the tariffs has not yet been released by the Chinese government but can likely be expected in the coming days.
March 22, 2018
The Trump Administration announced tariffs today on approximately $60 billion worth of Chinese imports, as President Trump campaign attempts to fulfill his campaign promise to be tougher on China’s trade practices and alleged intellectual property theft. The Presidential Memo can be found here.
The formal 301 Investigation Report had four key findings: China conducts and supports cybertheft; China uses discriminatory licensing processes; China forces technology transfers through joint venture requirements, foreign investment restrictions, and review and licensing processes; and China directs and facilitates investments and acquisitions that generate large-scale technology transfers. The USTR Fact Sheet can be found here.
As a result of these findings, the President instructed various Administration agencies to take action to protect U.S. intellectual property and technology. USTR will have 15 days to produce a list of products that will be subject to the tariffs. After a list is released, it will go through a formal 60-day comment process. The public will have 30 days to files comments on the list after it is formally published in the Federal Register. USTR will also announce the date of a public hearing for the products.
While a list of products will be released in the next two weeks, USTR Lighthizer previewed the types of products that will likely be included in his testimony in front of the Senate Finance Committee today. He said that it would be his preference to target products included in the Made in China 2025 agenda that has been publicized by the Chinese government. Those products would include:
- new advanced information technology
- automated machine tools & robotics
- aerospace and aeronautics equipment
- maritime equipment and high tech shipping
- modern rail transport equipment
- new energy vehicles equipment
- power equipment
- agriculture equipment
- new materials in biopharma and advanced medical products
Additionally, the 301 action signed by the president today also instructs the Department of Treasury to produce a list of investment recommendations for the Administration within 60 days.
China has promised to respond with reciprocal, proportional tariffs, likely on sorghum, livestock, and soybeans – a good in which China accounts for 1/3 of total exports. There has also been speculation that Boeing, which exports billions of dollars’ worth of airplanes to China ever year, may also be targeted for retaliation.
We will provide further details and analysis as more information becomes available. We will also lay out the comment and hearing process as soon as the product list is released.
March 16, 2018
Late this afternoon the Department of Commerce released its interim final rule for companies seeking product exemptions from the recently announced steel and aluminum tariffs.
The Interim Rule can be found here.
Exclusions may be granted, according to the rule, “if the Secretary determines the steel or aluminum article for which the exclusion is requested is not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality or should be excluded based upon specific national security considerations.”
As we’ve mentioned in previous additions of this report, exemptions are only available for individuals or organizations undertaking business activities (construction, manufacturing, supplying steel to users, etc.) in the U.S. Exemptions will only extend to the individual or organization that files the specific request, unless otherwise stated by the Department of Commerce.
As exemptions to the steel and aluminum tariffs are being promulgated under a formal regulatory procedure, companies and individuals should be aware that all exclusion requests, as well objections to those requests, will be made public.
The exclusion forms can be found here, though please be aware that they will not be available until March 19 when the interim formal rule is officially published in the federal register.
Exclusion Requests must include:
- Request for Exclusion from Remedies Resulting from the Section 232 National Security Investigation of Imports of Steel form or Request for Exclusion from Remedies Resulting from the Section 232 National Security Investigation of Imports of Aluminum
- Business activities within the U.S. that the requestor is engaged
- The basis on which the exclusion is sought
Objections to Exclusion Requests must:
- Include the Response Form for Objections to Posted Section 232 Exclusion Requests – Steel or Response Form for Objections to Posted Section 232 Exclusion Requests – Aluminum.
- Identify and provide support for why the exclusion should not be granted
- Be filed no more than 30 days after the exclusion is posted
Notably, the rule states that product exemptions may take up to 90 days, meaning companies would be subject to the tariffs in the intervening period.
We will continue to monitor and provide updates.
March 12, 2018
Companies and countries across the globe are still coming to terms with the significant tariffs that the White House announced on steel and aluminum imports last week. The proclamations signed by the President were short on detail and, in the intervening days, additional details have been scarce. However, more clarification should be coming on or before March 18, the date by when the Secretary of Commerce is required to lay out the process for affected parties to seek exclusions from the tariffs.
It is important to note that requests for exclusion from these tariffs (utilizing this process) will be available only to affected parties within the U.S.; thus, individual countries would not be able to seek relief in this way. However, there may be additional details that pertain specifically to countries (like the ones laid out for the EU below). If the Administration waits until March 18 to issue the procedures, affected parties would be left with only five days to work through the process before the tariffs go into effect on March 23, as announced.
The tariff proclamations have led to public lobbying and threats of retaliation from some of the United States most important trading partners. Australia seems to be the first non-North American country to break through, as Prime Minister Turnbull tweeted that the country had received a “commitment from the President.” It is unclear, however, what form that commitment had taken or any concessions required to achieve it.
EU trade leaders have been less successful in their efforts. Attempts to hammer out a deal over the weekend failed. Malmström and USTR Lighthizer, the U.S. laid out five principles that could result in exclusion from the steel and aluminum tariffs. The principles include whether the country is a security partner for the U.S.; whether it participates in the steel excess capacity global forum; if the country imposes trade defense measures to prevent dumped steel from entering its market; if it supports U.S. disputes in the WTO; and the steel and aluminum trade volume between the U.S. and that country. However, more details about the specifics of the procedure were unclear.
Additionally, as the contentious meeting between the U.S. and the EU was taking place, President Trump once again threatened to put tariffs on European cars. He followed up that sentiment, as well as several promises to “tax Mercedes-Benz… tax BMW” at a campaign rally in Pennsylvania on Saturday, with a tweet today saying that Secretary Ross would be “speaking with representatives of the European Union about eliminating the large Tariffs and Barriers they use against the U.S.A. Not fair to our farmers and manufacturers.” This, of course, was not well received by EU officials including Trade Commissioner Cecilia Malmström who promised to “stand up to the bullies” who use trade “as a weapon to threaten and intimidate us.”
U.S. and EU officials have said that they will continue to work through the week to reach a resolution.
March 8, 2018
Today, the President signed a proclamation instructing the International Trade Commission to update the tariff schedule to reflect an increased 25% tariff on steel and 10% on aluminum, effective after 15 days.
Canada and Mexico have been given indefinite exclusions, and the Administration said other countries may negotiate with the United States if they would like an exemption, though at this time it is unclear precisely what that means. However, it does mean that there will be opportunities for countries to present their arguments to the Trump Administration, something that even a couple of days ago seemed unlikely.
The proposed tariffs have received vociferous support from domestic steel and aluminum producers and labor unions, but also have been met with sharp opposition from global investors and America’s trading partners worldwide.
To justify these tariffs and bypass Congress’ traditional role in regulating international trade, the Trump Administration has invoked Section 232 of the Trade Expansion Act of 1962. This relatively obscure law authorizes Secretary of Commerce Wilbur Ross to investigate to determine if the import of any foreign good or product is a threat to national security. If deemed a threat, the president can set tariffs on the good or product – in this case, steel and aluminum – without the consultation of Congress.
While the Trump Administration argues that the steel and aluminum tariffs’ implementation meets the national security threat requirement under Section 232, this rationale may fail to meet the separate national security standard established in Article XXI of the General Agreement on Tariffs and Trade (GATT). WTO members are likely to challenge the new tariffs. The WTO can authorize retaliation under the principle of reciprocity.
Typically, specialty-product imports have tariff treatment that has been carefully negotiated, and the Most Favored Nation (MFN) status of most of our import and export trade regime requires that the lowest tariff be offered to all our trading partners if it is offered to one.
The effects of the President’s proclamation will mean retaliation from U.S. trading partners. Their responses will be sharply focused to have maximum effect politically and economically. The European Union has a laundry list of items, totaling about $3.5 billion in American imports, that it is ready to place tariffs on- everything from peanut butter to bedspreads, t-shirts to orange juice, Harleys to cranberries. China is also rumored to be considering increased tariffs on a host of items.
The President’s action on tariffs has received uncharacteristically strong pushback from Republicans in Congress. Yesterday, 100+ House Republicans sent a letter to the White House expressing “deep concerns” about the proposed tariffs. Senate Majority Leader Mitch McConnell also said that he had a “high level of concern” about how the tariffs would impact the economy, and Senate Finance Committee Chairman Orrin Hatch wrote a letter citing his “very deep concerns” that the tariffs could undo the gains made through tax reform.
Democrats on the Hill also pushed back on both the need for and impact of tariffs on steel and aluminum. Senate Minority Leader Chuck Schumer (D-NY) had strong words for the “sweeping” tariffs and urged the President to focus on China. Additionally, the moderate New Democrat Coalition in the House also sent a letter calling for immediate hearings on the potential impacts of the action.
The effects of this announcement will mean higher prices for basic items in the U.S. economy – from beer cans to lumber to autos. The announcement is likely to have far-reaching impact on inflation and the overall economy.
Some other trade highlights:
- Frustrated Republicans Dread Legislative Response to Trump’s Tariff Proposal – Weekly Standard (3/6)
“Republicans in Congress are desperately trying to talk President Donald Trump down from his proposed tariffs, lest they have to consider a legislative check on the White House instead—a move that some lawmakers say isn’t feasible. House Speaker Paul Ryan pushed back on Monday against Trump’s plan to impose a 25-percent tariff on steel and a 10-percent tariff on aluminum. Most Republican lawmakers have been quick to oppose the proposed tariffs, which they fear could spark a trade war and cause harm to various American industries and consumers, as well as undermine the economic gains Republicans expect from their tax bill. The tariffs were put forward in the name of national security and supposedly are intended to punish China, but the White House has left it open that they could apply across the board, without exemptions for close trading partners or allies.”
“Less than three months after signing the first major tax reform bill in 31 years, President Trump has announced that the administration will impose a 25 percent tariff, or tax, on imported steel and a 10 percent tariff on imported aluminum. While the new taxes are intended to reduce the demand for imported goods, thus opening the market to domestic producers, the cost of these taxes will be borne initially by firms that buy the imported steel and aluminum, and eventually passed on to consumers through higher prices. While the administration has not released estimates on the magnitude of these new taxes, we estimate that they could cost U.S. firms nearly $9 billion if 2018 imports equal 2017 levels.
President Donald Trump tweeted that “trade wars are good, and easy to win,” adding that “when we are down $100 billion with a certain country and they get cute, don’t trade any more-we win big. It’s easy!” So, if you play that out a bit, looking at one of the countries we currently trade with, would we “win big” if we were to just stop trading with it?