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Tracking Tariffs and Trade

October 11, 2019

Moments ago, the U.S. and China announced that they had reached a “phase one” agreement on trade.
According to President Trump, the deal includes $40-50 billion in agricultural purchases, intellectual property theft, and financial services. The U.S. is evaluating whether to rescind the currency manipulator designation, as well. However, Secretary Ross clarified that a resolution on Huawei is not part of the trade deal.
BUT… nothing has been written down.
The two countries indicated that hammering out the text of the deal could take several weeks and might be signed by both parties next month – U.S. and Chinese leaders will be in Chile for the Asia-Pacific Economic Cooperation (APEC) event.
In the interim, the planned tariff rate increase (from 25% to 30%) scheduled for October 15 will be delayed indefinitely. As of today, there is no decision on whether to postpone the tariffs scheduled to go into effect in December.
Additionally, President Trump indicted that the two countries were “very close” to ending the trade war and there would be possible Phase Two and Phase Three agreements in the future.
While the news today is positive, some aides involved in the discussions took a more pessimistic tone, at least partially because Vice Premier Liu He does not have the authority to make an agreement, and as with all things in trade, the devil is in the details.
It remains to be seen whether the “progress” made in the last two days will prove to be lasting.

October 2, 2019

Late this afternoon, USTR announced the list of goods that would be subject to retaliatory tariffs in response to unfair subsidies that the European Union gives to Airbus.

The tariffs will go into effect on October 18.

The $7.5 billion in retaliation is the result of a nearly decade-long fight between the U.S. and EU and constitutes the largest award ever sanctioned by the body.

The list of goods subject to the tariffs can be found here.

According to the document, airplanes and airplane parts from France, Germany, Spain, and the United Kingdom will be subject to a 10% tariff.

All other products listed will face a 25% duty. Those products, which are divided up by country include, but are not limited to:

  • Irish and Scotch Whiskies (UK)
  • Coffee and various tools (Germany)
  • Waffles, wafers, and sweet biscuits (UK and Germany)
  • Olive oil, green olives, various cheeses (UK, Spain, Germany)
  • Liqueurs and cordials (Germany, Ireland, Italy, Spain, UK)
  • Olives and wine (France, Germany, Spain, UK)
  • Pecorino cheese (All EU countries except France and Bulgaria)
  • Yogurt, Butter, Processed Cheese, Peaches, Cherries (All EU countries except France and Poland)
  • Pork and Cheese (All EU countries except Poland)
  • Gruyere, cheddar, Romano, Reggiano, Parmesan, Provolone, Provoletti, Swiss, and Emmentaler cheese; Mussels, jellies (All EU countries except France)
  • Variety of cheeses and cheese substitutes, Butter, Yogurt in dry form, lemons, clementines, razor clams, molluscs, oranges (All EU countries)

USTR, in their announcement, also stated that they reserved the right to change the products effected or the rates that the tariffs were issued at any time.

September 26, 2019

Yesterday, the United States announced a bilateral trade agreement with Japan that will lower $7.2 billion of import tariffs on American food and agricultural exports. That includes easing import tariffs on U.S. pork, corn, beef and other goods. In exchange, the United States will ease tariffs on Japanese industrial products. This agreement is similar to the one made during the negotiations over TPP, which President Trump pulled out of upon taking office in January 2017.

This agreement makes it even less likely that the United States will impose automobile tariffs on Japan, although there was no formal written agreement that Japan would not be subject to auto or auto tariffs at a later date. Stopping these tariffs, related to national security, has long been a priority for Prime Minister Abe and for Japanese auto manufacturers, which have a significant business presence in the U.S. Prime Minister Abe said that he had “firmly confirmed” with President Trump that “no further additional tariffs” would be imposed on the Japanese.

USTR’s Fact Sheet for the Agreement can be found here, and a comprehensive summary of the agriculture provisions can be found here.

Digital Trade Highlights

The Digital trade portion of the agreement replicates much of the language used in USMCA, which was based on the negotiations conducted during U.S. participation in TPP.

Essentially, the agreement:

  • Prohibits imposing duties on digital products transmitted electronically
  • Allows for flexibility to use encryption technology
  • Ensures barrier-free cross-border data transfers
  • Prohibits requiring data localization

Agriculture Highlights

Tariff Reduction: For products valued at $2.9 billion, Japan will reduce tariffs in stages. Among the products benefiting from this enhanced access will be:

  • fresh beef
  • frozen beef
  • fresh pork
  • frozen pork

Tariff Elimination: Tariffs will be eliminated immediately on over $1.3 billion of U.S. farm products including, for example:

  • almonds
  • blueberries
  • cranberries
  • walnuts
  • sweet corn
  • grain sorghum
  • food supplements
  • broccoli
  • prunes

Other products valued at $3.0 billion will benefit from staged tariff elimination. This group of products includes, for example:

  • wine
  • cheese and whey
  • ethanol
  • frozen poultry
  • processed pork
  • fresh cherries
  • beef offal
  • frozen potatoes
  • oranges
  • egg products
  • tomato paste

Country Specific Quotas (CSQs): For some products, preferential market access will be provided through the creation of CSQs, which provide access for a specified quantity of imports from the United States at a preferential tariff rate, generally zero. CSQ access will cover:

  • wheat
  • wheat products
  • malt
  • glucose
  • fructose
  • corn starch
  • potato starch
  • inulin

September 11, 2019 Update II


This evening, President Trump announced that the increase in tariffs originally scheduled for October 1 would be delayed until October 15. Although the president tied his decision to a request from China amid their 70th Anniversary celebration on October 1, it seems more likely that the decision is a gesture of good faith as negotiations between the two countries begin again.

Additionally, it is not out of the realm of possibility that the president saw the Chinese decision to exempt 16 American products from tariffs earlier today (see our previous update for more details) and wanted to match it will a similar conciliatory gesture.


This afternoon, USTR formally responded to a document produced by the House Working Group on USMCA in early August detailing their requested changes to the agreement. This response was seen as the next necessary step for movement of the agreement.


The response comes after a meeting between USTR and House Republicans on USMCA and before a planned meeting next week between USTR Lighthizer and House Democrats. In addition to the issues highlighted by the Working Group – labor, environment, biologics, and enforcement – USTR is attempting to reach some resolution on other issues of bipartisan concern.

Among the biggest concerns from the House Ways and Means Committee and Senate Finance Committee members on both sides of the aisle is how much power the current version of implementing legislation designates to the president on issues like using section 301 to force compliance and the sunset clause. Additionally, the de minimis threshold and dispute settlement remain issues of concern for Republicans.

At this point, it seems likely that we will have a clearer picture of where USMCA stands – and its prospects for passage this fall – next week.

September 11, 2019

Today, China announced that it had granted 16 products that are imported from the U.S. exemptions from the current tariffs.

The products are divided into two lists. The first list is for products that currently have tariffs on them, with companies able to apply for reimbursement for the tariffs already paid. The exemption is good from September 17, 2019 to September 16, 2020.

The second list, which is also valid from September 17, 2019 to September 16, 2020, will not allow for tariff reimbursement.

Notably, high-profile American exports like soybeans, pork, and corn are not included.

The products that will now be exempted for tariffs are:

List 1

  • 03063610 Other shrimp and prawn seedlings
  • 12141000 Aster meal and pellets
  • 12149000 Other purpura (except coarse powder and pellets)
  • 23012010 Fish meal for feed
  • 27101991 Lubricating Oil
  • 27101992 Grease
  • 29349990 Cycloprom, insecticidal ring, insecticidal nail, polythiane, etc. (including methylthiophosphorus, buprofezin, aspartate, indoxacarb)
  • 29349990 Decitabine, fluorouridine, cyclophosphamide, gefitinib, capecitabine, raltitrexed, fludarabine phosphate, fluoride, cytarabine hydrochloride, gemcitabine hydrochloride, ectinib hydrochloride, ifosfamide
  • 34021300 Nonionic Organic Surfactant
  • 34031900 Mineral oil <70% lubricant
  • 34039900 Lubricants containing no petroleum or oils from bituminous minerals
  • 90221400 Medical linear accelerator

List 2

  • 04041000 Whey for feed (2%-7% by weight protein, 76%-88% lactose)
  • 27101299 Release agent (oil by weight and oil extracted from bitumen ≥70%)
  • 27101919 Isoparaffin solvent (early boiling point 225 ° C, flash point 92 ° C, density 0.79 g / cm3, viscosity 3.57mm2/s)
  • 27101993 Lubricating base oil (product viscosity at 100 degrees Celsius)

Please let us know if you have any questions!

August 25, 2019

indicated on Friday, China has announced that it would implement tariffs on $75 billion in U.S. imports. However, there was some confusion about the lists of specific products and what tariff rates they would be subject to, as the Chinese government released only summarizing statements in English.
There is now more clarity surrounding the answers to these questions.
5,078 American products imported into China will be subject to increased tariffs, ranging from 5 – 10%.
Products contained on List 1 will be subject to tariffs on September 1. 916 products on this list will be subject to 10% tariffs; the other 801 products will face a tariff of 5%.
Products contained on List 2 will be subject to tariffs on December 15. 912 products on the list will be subject to 10% tariffs, and the other 2,449 products will be subject to a 5% tariff.
Products are divided by tariff rates, and the rates are reflected in the lists above.
Please reach out if you have questions about these specific lists or other trade issues.

August 23, 2019

Today has been a busy day on the China front, with bad news coming on all fronts.
This morning, China announced that it would increase tariffs on $75 billion in imports from the U.S. The tariffs will raise from 5% to 10% in two different groupings – the first coming on September 1 and the second on December 15, coinciding with similar actions by the U.S. The Chinese will also raise tariffs on American vehicles and auto parts from 5% to 25% on December 15.
President Trump immediately expressed his displeasure in a series of tweets and stated that he would make an announcement about his response this afternoon. Late this afternoon in another series of tweets, as most trade policy in this Administration seems to be made, he announced that he was increasing tariffs on Chinese tariffs. The 10% tariffs (list of effected products) scheduled to go into effect on September 1 will now be increased to 15%. Additionally, the 25% tariffs that currently exist on some $250 billion in Chinese imports will increase to 30% beginning on October 1.

Unfortunately, it seems like the situation is likely to deteriorate further before any resolution is reached. It is not out of the question that there will be further action this weekend or next week.

August 13, 2019

This morning, USTR released the list of products from China that would be subject to a 10% tariff on September 1.
However, before they released the list, they announced that some products were removed from the original list that circulated in May “based on health, safety, national security and other factors.” Additionally, USTR delayed some tariffs on products like “cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing.
The September 1 list can be found here.
The December 15 list can be found here.
Although some big-ticket consumer items were delayed until December, there are still a significant number of products that will hit consumers on September 1, including:
  • Hundreds of tariff lines devoted to clothing and accessories
  • 90+ tariff lines devoted to shoes and footwear, including ski boots and golf shoes
  • Household products like bed linens, curtains, and table cloths
  • Bluetooth speakers (including Airpods), smart watches, fitness trackers, and smart speakers
  • Some televisions
  • Sports equipment including golf clubs and balls, tennis balls, inflatable balls, baseballs and softballs, football and soccer equipment
  • Diapers
In addition to the products that USTR identified as being delayed, other tariffs were also delayed including:
  • A variety of chemicals
  • Fireworks
  • Office and school supplies
  • Gloves
  • Pet toys
  • Umbrellas
  • Ceramics and glassware
  • Baby products like high chairs, walkers, swings, and play yards
The decision to delay some products until the middle of December is most assuredly due to a desire to avoid raising prices on the consumer goods that are purchased in large quantities around the holiday season. The necessity of this delay became evident as the stock market has suffered significant losses since the president announced his decision to implement further tariffs on China at the beginning on the month.

However, the decision to delay some tariffs negates the president’s narrative that the Chinese government pays these tariffs. After all, if American businesses and consumers don’t pay these tariffs, there would be no need for a delay around the holiday season.

August 1, 2019

By Tweet, President Trump announced that the U.S. would levy 10% tariffs on$300 billion in Chinese products on September 1.

The announcement comes on the heels of a meeting between the U.S. trade delegation, including USTR Lighthizer and Treasury Secretary Mnuchin, and their Chinese counterparts in Shanghai on Monday.

The meeting had been billed as not particularly successful and no formal agreement extending the detente that was reached in late June between the two countries. President Trump also has expressed his frustration about Chinese promises to purchase U.S. agricultural goods that never have come to fruition.

A USTR notice formalizing the announcement is expected to be released shortly, and we will send it around. The announcement will include the full list of tariff codes, though it is likely to closely resemble what USTR released on May 13 (and is linked above).

The timing on these tariffs could have significant impacts, as the products will likely include a host of consumer goods purchased during the holiday season.

July 11, 2019

As we flagged yesterday, USTR has opened a Section 301 investigation into France and its new Digital Services Tax (DST).

Today, it released the Federal Register notice for the investigation, detailing what it was specifically asking stakeholders for comments on, as well as outlining a timeline for comments and hearings.

The notice can be found here.

USTR highlights three areas that the investigation will “initially” focus on evidence that the DST is discriminatory in nature in that it is specifically targeted to affect American technology companies; the January 1, 2019 retroactive nature of the tax; and that it is an “unreasonable” tax policy that departs from norms in extraterritoriality, taxing revenue not income, and penalizing technology companies for their commercial success.

The notice requests comments from stakeholders focused on:

  • Concerns with the DST related to the three areas highlighted above
  • If the DST is unreasonable or discriminatory
  • How – and to what degree – the DST burdens and restricts U.S. commerce
  • Where the DST violates France’s WTO and international commitments
  • What actions should be taken by the U.S. in response

Comments are due on August 19, which is when the public hearing will also take place. Requests to appear at the hearing must be filed by August 12, and post-hearing comments are due by August 26.

Please let us know if you have any questions!

July 10, 2019

Late this afternoon, USTR announced that President Trump had directed it to open a Section 301 investigation into France and its new Digital Services Tax (DST).

The announcement can be found here, and a Federal Register notice for public comment and a hearing is expected within the next couple of days.

USTR will study whether the DST will have “discriminatory or unreasonable burdens” or will restrict U.S. commerce. DST, which will be retroactive to January 1, will impose a 3 percent tax on specific kinds of revenue for digital platforms that have revenues exceeding 750 million euros ($844 million) in total revenue and 25 million euros ($28 million) in revenue in France.

Section 301 of the Trade Act of 1974 used in this instance is the same mechanism that the U.S. has used to levy $250 billion in tariffs against China, and it seems reasonable to suggest that tariffs could be levied against France as a result of this investigation.

This decision from the president and USTR comes amid a number of other issues relating to trade with the European Union. The U.S. is currently in the midst of attempting to negotiate with the EU on automobiles and section 232 steel and aluminum tariffs (and retaliation) and subsidies for Airbus and Boeing, as well as a larger free trade agreement. This investigation is likely to make none of these issues any easier.

Additionally, the DST comes as large technology companies, like Facebook and Google, are facing increased global scrutiny on a host of issues and have been the target for criticism by parties that include President Trump.

It is unclear at this time how USTR’s decision will be received by congressional leaders, though both Senators Grassley and Wyden wrote to the Treasury Department in late June urging them to consider using section 891 of the IRS Code to levy a “double rate of U.S. tax… for citizens and corporations of foreign countries” engaging in discriminatory practices like the DST. However, there is a clear difference in what Grassley and Wyden asked for a what could come from a USTR determination to levy tariffs – tariffs would be paid by U.S. businesses importing goods from France.

July 1, 2019

On April 8, the U.S. released a list of items that could be subject to tariffs on goods from the EU because of the subsidies that are provided to Airbus – an action that was followed up on April 18 by the EU proposing tariffs on U.S. goods because of subsidies that benefit Boeing (more details about both actions can be found here).

Today, the U.S. followed up by releasing an additional list of items from the EU – totaling $4 billion – that could be subject to tariff.

The list can be found here.

The new 89 tariff codes are mainly focused on agricultural products, as well as metals and chemicals. Among the newly identified products:

  • Whiskies (including Irish and Scotch whiskies)
  • Pastas
  • Cheeses, including gouda, romano, reggiano, provolone, provoletti, and sheep’s milk
  • Olives
  • Cherries
  • Coffee
  • Pork products including sausage and frozen hams
  • Ammonia, Ammonium sulfate, and Ammonium nitrate
  • Copper

Comments on this new list are due by August 5, and requests to appear at the hearing (also on August 5) are due by July 24.

Please reach out if we can be of assistance.

May 30, 2019

It seems like every time there is some progress on the trade front, there is a giant step backwards.

Today, USTR Lighthizer sent a draft statement of administrative action to Congress on the U.S. – Mexico – Canada Agreement, which kicks off a 30-day clock before the Administration can sent implementing language to Capitol Hill.

House Democrats, who had taken a more positive tone in recent weeks on working with USTR to address some of their concerns, but today’s decision by USTR threatens to undo that good will. House Ways and Means Chairman Richie Neal (D-MA) said in a statement today that the “premature submission of a draft statement of administrative action has no impact on [the] outstanding work or the timeline moving forward.”

Speaker Pelosi’s statement emphasized that USTR’s decision “indicates a lack of knowledge on the part of the Administration on the policy and process to pass a trade agreement.”

After seemingly sticking its finger in the eye of a body that it needs to secure passage of his signature trade achievement, President Trump decided to follow up by announcing a 5% tariff on all products coming in from Mexico, beginning June 10, with those rates “increasing” if his demands on immigration aren’t met. According to a statement, the rate will increase to 15% on August 1, 20% on September 1, and 25% on October 1.

Like many things the president announces by tweet, there were scant details about how the policy will be implemented or what Mexico has to do to have the tariffs removed. There has been no formal notice placed on the federal register, though that may be coming as early as tomorrow. The President is using powers under the International Emergency Economic Powers Act to carry out this action.

An increase in tariffs on Mexican imports is likely to have wide-ranging consequences, from retaliatory tariffs (like the ones that were just removed as a result of the elimination of the steel and aluminum tariffs) to a delay in Mexico’s ratification of USMCA. Additionally, the move is likely to be poorly received on Capitol Hill, where Members have long warned against using tariffs as a way to deal with immigration, though it remains to be seen if Congress will take concrete steps to address a president’s ability to levy tariffs in this way.

More details – and retaliation – are likely to come in the next day. After all, it seems like all big trade announcements come on Fridays!

Please reach out if we can be of assistance.

May 17, 2019

This morning, the White House instructed USTR to negotiate with the EU, Japan, and “any other country the Trade Representative deems necessary” to address how the import of autos and auto parts has harmed U.S. producers and report back within 180 days.

The order can be found here.

Interestingly, the White House released detailed some of the “national security” justifications that Commerce found in its 232 auto investigation – the result of which is still not public. The crux of the argument seems to hinge on research and development in the auto sector and the rapid shifts in technology in this space. The ties that the report seemingly drew between national security and domestic auto production raised eyebrows in the trade space because they seemed tangential at best.

Ultimately, the White House declared that “domestic conditions of competition must be improved by reducing imports. American-owned producers must be able to increase R&D expenditures to ensure technological leadership that can meet national defense requirements.”

Interestingly, there was verbiage in the draft order that instructed USTR to “limit and restrict” imports that has been removed from this final order.

The EU has previously been adamant in their refusal to agree to quotas in the auto and auto parts sector, so it remains unclear about how far these negotiations can actually go.

Please reach out if we can be of assistance.

May 13, 2019

Moments ago, USTR released its awaited (though dreaded may be a better word) tariff list that covers approximately $300 billion in imported products from China.

The list can be found here.

USTR is soliciting comments on placing a tariff of up to 25% on these products. Comments are due by June 17. A request to appear at the hearing is due by June 10, and the hearing will begin on June 17. Rebuttal comments will be due seven days after the hearing concludes.

This time frame is consistent with the one I laid out in the Friday Tracking Tariffs and Trade Update.

The product list is as long as it is varied. It covers live animals, agriculture, horticulture, and aquaculture; sanitary items; household products; clothing and footwear; glassware and other table and kitchen products; metals; telecommunications and electronics; jewelry and watches ; clocks; toys; baby items like diapers; and too many other things to name here.

The release of the list comes after China raised tariffs on $60 billion in U.S. imports.

Please reach out if we can be of assistance.

May 10, 2019

When the U.S. and China were unable to reach an agreement last night, tariffs on $200 billion in Chinese imports increased from 10% to 25%. Please note, this increase applies only to products that left China after 12:01 a.m. on May 10 – products that were already in transit will be levied with the original 10% tariff. Details on this can be found here. The new exclusion list can be found here.

The meeting between the U.S. and China officially concluded today with no discernible progress except for an agreement to keep talking. A U.S. delegation will travel to Beijing at some point in the future to continue talks. According to Chinese media, three major issues remain in talks, though these issues include making sure a deal is “balanced,” which could include multiple moving parts.

Because of the failure of the talks, USTR announced late this afternoon- after the stock market closed – that the U.S. would publish a new list of products on which the U.S. was proposing to levy tariffs. This fourth list would incorporate the entirety of Chinese imports that have not yet been affected by tariffs, totaling some $300 billion (not a typo). It is unclear whether this list will include products that have been removed from past lists or that have been affected by product exemptions.

The list, should it actually be implemented, would almost certainly affect consumers directly. The vast majority of the products on the three previous lists were not products that would be directly purchased by consumers. However, by necessity, this list will include those products, which will likely include iPhones (and other Apple products), clothing, and toys.

It is unclear when these tariffs will go into effect, but it seems likely to happen this summer. From preliminary list to imposition, the first tranche of tariffs took 94 days; the second tranche took 69 days; and the third tranche took 76 days. If this fourth list were to take the average of the previous time frames, the target imposition day would be July 28. However, because USTR indicated this list would include all Chinese imports and it may not be necessary to take as long to remove products from the list, the time frame could be condensed significantly. It would not be out of the question for these tariffs to go into effect sometime in June.

These additional tariffs, in addition to the tariff increases from earlier today, are likely to have an impact on the economy, and the Chinese should be effected to retaliate. However, much of their retaliation is likely to be in the form of non-tariff barriers.

May 9, 2019

Product Exclusions. This morning, USTR announced that it had added additional products to its exclusion list for the first 301 tariff list that totals $34 billion.

The new exclusion list can be found here.

The list is quite varied in what it covers.

There are several 10-digit HTSUS codes involved in the purification or filtering of water, like those involved in refrigerators, pools, and waste water treatment facilities. Numerous codes for items used in manufacturing, including metering spools of aluminum and steel and coils. Additionally, push-button switches, radio remote controls for garage doors and pet collars, as well as DC electric motors and AC electric motors all of 10-digit codes included.

Because exemptions are given at the 10-digit HTSUS level, not the 8-digit level where most of these tariffs were levied, it is important to verify that your import is included in these exemptions if you think it might be.

Chinese Retaliation. Yesterday, the Chinese announced that they felt “deep regrets” that the U.S. was going to raise tariff rates on Friday and said that they would be forced to retaliate if this actually happened – the full, translated, Chinese statement is below but the original can be found here. The only hope seems to be a breakthrough in talks that are scheduled to resume today in Washington, though that seems unlikely at this point.

Chinese statement:

“The US intends to raise the tariff of 200 billion US dollars of Chinese exports to the United States from 10% to 25% on May 10. The escalation of trade friction is not in the interests of the people of the two countries and the people of the world. The Chinese side deeply regrets that if the US tariff measures are implemented, China will have to take necessary countermeasures.”

May 8, 2019

This morning, USTR put out the official Federal Register notice on the increase in tariffs on $200 billion in Chinese products from 10% to 25%

You can find the notice here.

As we detailed on Monday, the tariff rate will hit at 12:01 a.m. on Friday, but there was nothing unexpected included in the publication this morning. Additionally, there has been no further news on the president’s suggestion of adding tariffs to all Chinese products imported into the U.S.

Meetings between the U.S. and Chinese delegation will take place tomorrow. However, a Reuters story this morning that suggested the Chinese walked back virtually all of their commitments on substantive changes from IP and technology transfer to financial services access would indicate that a deal is unlikely to be reached this week – a sentiment affirmed by House Speaker Nancy Pelosi at a Washington Post event this morning.

May 6, 2019

Moments ago, USTR Robert Lighthizer confirmed that the U.S. will raise tariffs on $200 billion in Chinese products from 10% to 25% – as President Trump had threatened over the weekend.

The new tariff rate will hit at 12:01 a.m. Friday morning.

Lighthizer indicated that a formal Federal Register notice will come tomorrow, although it was less clear what would happen with the second half of the President’s threat, to levy tariffs on all Chinese goods entering the U.S.

The Chinese delegation is expected to arrive on Thursday to continue negotiations, but officials said that they had not had any contact with the lead Chinese negotiator over the last 24 hours.

Negotiations seemed to have broken down when the Chinese government walked back commitments that they had made previously on issues of significant importance to the U.S., including on forced technology transfer.

USTR Lighthizer and Treasury Secretary Steve Mnuchin also made clear in their statement that the U.S. would not cut off discussions with the Chinese but hoped an increase in the tariff rate would drive home the seriousness of the U.S. position and could be reversed if progress was made again in the talks.

April 18, 2019 – Part II

The U.S. International Trade Commission (ITC) just released its report on the economic impacts of the proposed U.S.-Mexico-Canada Trade Agreement.

The report can be found here.
We will provide a more in-depth look at some of the conclusions of the report, as well as how it impacts various portions of the economy, and its political implications in the next day or so. In the interim, the report draws some basic conclusions.
It states that the digital trade and automotive rules of origin would have the “most significant effects on the U.S. economy.”
Additionally, the report concludes that USMCA would:
·        Raise real GDP by $68.2 billion (0.35 percent)
·        Raise employment by 176,000 jobs (0.12 percent)
·        Increase exports to Canada by $19.1 billion (5.9 percent) and Mexico by $14.2 billion (6.7 percent)
Finally, the report concludes that USMCA “would likely have a positive impact on all broad industry sectors within the U.S. economy” with manufacturing experiencing the largest percentage gains.

April 18, 2019

As we predicted in our April 9 update, the European Union has responded to the latest U.S. action in the ongoing spat over subsidies to airplane manufacturers with a set of proposed tariffs on American products.

The EU is inviting private entities to comment on their list, with comments being due by May 31. The procedure for submitting those comments, as well as the required information, can be found here.

Though EU Trade Commissioner Cecilia Malmström said that the EU does “not want a tit-for-tat,” she also said that the EU was committed to defending a “level-playing field” for their airplane industry. Malmström pointed to the recent ruling by the WTO on U.S. subsidies for Boeing as their justification for levying these retaliatory tariffs.

The preliminary EU list covers around $20 billion in U.S. imports – and an expansive list of products – including:

  1. Seafood
  2. A variety of Cheeses
  3. Fruits, Vegetables, and Nuts
  4. Fruits
  5. Sugar
  6. Chocolate
  7. Juices
  8. Ketchup
  9. Sparkling Wine, Wine, Rum, Vodka, and Other Spirits
  10. Tobacco in many different forms
  11. Bandages and other medical adhesive dressings
  12. Suitcases, Briefcases, Handbags, and Wallets
  13. Engine parts
  14. Tractors
  15. Motorcycle parts
  16. Helicopters
  17. Video game consoles
  18. Airplanes

Like the U.S. product list, the EU will wait until an arbiter’s final decision on how much retaliation would be permitted. However, unlike the U.S. decision, which is expected this summer, a decision on the Boeing subsidies is not expected until May 2020.

The news of the decision by the EU to levy its own set of tariffs is not likely to be well-received by the White House. This news may also be compounded today by the scheduled release of the ITC report on the economic impacts of USMCA, which is expected to present little good news for the White House or those in Congress pushing the adoption of the agreement. President Trump has reacted negatively to tariff retaliation in the past. Additionally, because the U.S. used Section 301 to justify the original set of tariffs, they may feel they have the power to add additional products to the list due to the retaliation.

The decision by both sides to levy tariffs is likely to play into any large trade negotiations that take place between the U.S. and EU. Agriculture is already a significant stumbling block and adding additional complications, like these tariffs, will not help the process.

April 9, 2019

The simmering battle between the U.S. and the EU on the subsidies that the latter provides to aviation giant Airbus look to have reached the boiling point.
Last night, the U.S. Trade Representative announced that they would begin the process for levying tariffs against EU countries under Section 301 of the Trade Act of 1974 – the same provision recently used to hit China with tariffs on $250 billion of its products. The U.S. points to World Trade Organization (WTO) decisions that have “repeatedly” found that EU Airbus subsidies cause adverse effects to the U.S.
USTR calculated the damage done by these subsidies to be $11.2 billion per year, and the list of products that they have identified for tariff action reflects that number. The amount is currently being reviewed by a WTO arbiter, and a decision is expected this summer. A final list will be released at that time.
The preliminary list is divided into two parts. The first will only target France, Germany, Spain, and the UK and contains only 9 10-digit HTS codes that target limited aviation products:
  1. New, non-military helicopters
  2. New passenger aircraft
  3. New cargo aircraft
  4. Undercarriages and parts used in new civil aircraft
  5. Fuselage and fuselage sections, aluminum wings & wing assemblies, and horizontal and vertical stabilizers
  6. Other parts for civil aircraft
The second list targets all of the twenty-eight member states of the European Union. It is a wide-ranging 317 10-digit HTS code list, with a focus on food and beverage, clothing, kitchen products, and other assorted goods. Among the products included on the list is:
  1. Seafood like trout, crab, salmon, and swordfish, mussels, clams, and scallops
  2. Butter and Yogurt
  3. A myriad variety of cheeses
  4. Fruits
  5. Wine, grape brandy, liqueurs and cordials
  6. Handbags
  7. Yarns, carpets, and tapestries
  8. Sweaters, outerwear, suits, swimwear
  9. Blankets and bed linens
  10. Stone and ceramic
  11. Glassware, table knives, butchers and kitchen utensils
  12. Parts for bicycles and motorcycles
  13. Clocks
The EU is unlikely to allow these tariffs to go without response. This morning, the European Commission pointed out that the WTO is preparing to rule on a case they have brought against U.S. subsidies for Boeing, and they have begun the process of preparing retaliatory action.

Although this action, described as a perfectly legitimate use of countervailing duty tariffs by Finance Committee Chairman Chuck Grassley (R-IA), is clearly separate from other trade disputes between the U.S. and EU, it cannot be looked at in a vacuum. The U.S. and EU are trying to determine the parameters for free trade agreement discussions, with the main sticking point being whether to include agriculture – long a U.S. priority. The fact that the U.S. clearly targets some of those products with these tariffs will not make the process any easier. Additionally, President Trump is also considering levying tariffs on auto and auto parts imports that would also target the EU.

March 5, 2019

Outside of the ongoing negotiations with China and the president’s consideration of a 232 report on whether to place tariffs on autos and auto parts, the past several days have been busy in the trade space.

Removing India and Turkey from GSP. Last night, USTR announced that both countries will be removed from the Generalized System of Preferences, though the process will take at least 60 days because the Administration is required to notify Congress and the governments of the respective countries.  

USTR began its investigation into Turkey’s ongoing status in September 2018. In announcing their decision, USTR pointed out that Turkey’s economy has grown and diversified since its inclusion in GSP in 1975 and was now “sufficiently economically developed and should no longer benefit from preferential market access.”

India, however, was removed because of its government’s “failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors,” according to USTR. The investigation into India, which began in April 2018, was launched by USTR in conjunction with complaints from the U.S. Dairy Export Council and the Advanced Medical Technology Association and reflected concerns on both market access and an increase in trade barriers.

Due to statuary requirements, the earliest Turkey and India will be removed from GSP is May 3.

232 Investigation into Titanium Sponge Imports. Yesterday, the Commerce Department launched a 232 investigation into the import of titanium sponge imports. A U.S. domestic producer had petitioned the Department in September, and the Department says that 60 percent of titanium sponges are imported.

Titanium sponge, which is the primary form of the metal that is used to make other forms of titanium used in manufacturing, is used in a host of products including, military aircraft, chemical plants, electric and desalination facilities, automobiles, and bio-medical devices.

This 232 investigation comes on the heels of investigations into steel and aluminum, automobiles and auto parts, and uranium.

USTR 2019 Trade Policy Agenda. USTR released its 2019 Trade Policy Agenda, which also includes its 2018 Annual report. There was nothing particularly groundbreaking discussed with the Administration’s priorities, which included enforcing U.S. laws and trading rights; pursuing trade deals with Japan, the UK, and EU; addressing issues with GSP; and passing USMCA.

February 27, 2019

This morning, the House Ways and Means Committee held a hearing entitled “U.S. – China Trade.” This is the first trade-focused hearing of the now Democratically-led Committee. It is also the first public hearing to feature USTR Robert Lighthizer as the Trump Administration attempts to negotiate a large trade deal with the Chinese. The hearing was long and covered substantial ground on what USTR was focusing on with their negotiations with China.

Below are the highlights of the hearing. Please don’t hesitate to reach out if you would like the whole (10+ page) report.

Emphasizing The Big “IF.” Ambassador Lighthizer repeatedly emphasized that a deal is not a forgone conclusion. In almost all of his answers, he reiterated that certain things would happen “if” a deal was reached. This seems contrary to the president’s repeated statements on reaching a deal with President Xi.  

Soybeans are Not Sufficient. Lighthizer was clear in his statements that a simple purchase agreement would not be acceptable. He went as far as to say that a deal without structural changes wouldn’t be worth anything.

Most Important Part of Negotiation. USTR Lighthizer was clear that the most important thing the Administration was trying to do is stopping the non-economic transfer of Technology.

Defining Success. USTR Lighthizer highlighted seven aspects of what he would consider to be a successful negotiation:

  1. enforceability
  2. real rules on forced technology transfer
  3. minimal intellectual property requirements – if we have an agreement this section alone will be 27 or 28 pages
  4. specific provisions on services – China has rules that keep us out of banking, payment, and others
  5. non-tariff barriers like industrial subsidies
  6. agricultural issues
  7. currency restraints

Details on Enforcement. Lighthizer presented substantially new details on how a China deal would be enforced. If there is an agreement, there will be a process at which at the Office Director-level, with monthly meetings. At the vice-ministerial level, there will be quarterly level meetings; and at the ministerial level, there will be semi-annual meetings. There will be two different paths to complaints. One path will be for individual companies going directly to USTR with complaints (these can be anonymous sue to retaliation fears) that are then addressed through the process described above. The other path will be for systemic problems that are worked on separately. Lighthizer said that leveraging additional tariffs would be possible of obligations were not met.

Formal Delay of Tariff Increases. There will be a formal Federal Register notice on delay of List 3 tariffs increasing to 25% in the next day or so. President Trump had announced this intention last weekend.

List 3 Exclusion Process. Although the last spending bill included an instruction for USTR to establish an exclusion process within 30 days, Lighthizer was noncommittal on whether they would comply. He said that he was investing where the process stood.

Importance of USMCA. Some of Lighthizer’s most impassioned words were reserved for the importance of passing USMCA. He reiterated that there is no trade program if it doesn’t pass. The U.S. would have no credibility with China or any other trading partner to make a deal without it. Ultimately, if USMCA doesn’t pass, the U.S. shouldn’t bother with anything else.

Currency Manipulation. A number of members brought the issue up. Lighthizer said that there was no agreement on this until there was agreement on everything, but there have been substantial discussions on the issue. Additionally, he pointed out that China is not the only currency manipulator in Asia, singling out Japan, as well.

232 Tariffs on Canada and Mexico. Lighthizer reiterated that he was hopeful a deal would get done on the issue but offered no timeline.

January 29, 2019

With the longest government shutdown in history officially concluded, attention now shifts to what, if any, impact it will have to ongoing trade actions.


The U.S. International Trade Commission, which is responsible for many investigative trade matters, announced that the shutdown will cause it to push the deadlines for its ongoing investigations and reports. Notably, this includes the report on the economic impacts for the USMCA that was originally due March 15.

The 35-day delay means that the report may not be produced before May 5 – a significant delay in efforts to ensure Congressional approval on the agreement this year. Although ITC could produce the report earlier than this new deadline, the sheer volume of investigations and reports they currently have underway casts a doubt on this possibility.

Although there was a hope that USMCA could be addressed during the first half of the year, this delay – along with rumblings of discontent from both sides of the aisle – make that unlikely in the extreme. The general consensus before this delay was that a mid-summer timeline was reasonable; however, a delay of a month and a half pushes this timeline into the early fall because of the month-long congressional August recess.

The longer that USMCA drags into 2019, the more complicated the politics around approving the agreement become. Democrats, already skeptical of the enforceability of some aspects of the agreement, will be unlikely to want to give the president a “win” in an election year, saying nothing of the sheer number of Democratic members of Congress that will likely be running for the county’s highest office being loath to vote for this agreement.

The uncertainty around the U.S. timeline of USMCA is also impacting our foreign partners. It was long considered a given that Canada and Mexico would wait for Congress to approve the agreement before undertaking similar measures in their own countries. However, a delay may force a change in calculus. Canada, in particular, will have to make a tough decision, as their federal election comes on October 21, and the House of Commons is widely expected to adjourn in June and not return until after the election is held.

232 Tariffs on Canada and Mexico

During negotiations to replace NAFTA, the Trump Administration frequently said that the 232 tariffs on steel and aluminum placed on Canada and Mexico (and others) would be dealt with as soon as a trade agreement was reached – seemingly using the tariffs as leverage, although many in the Administration denied that that was the purpose.

As recently as late December, there seemed to be significant progress on reaching a deal with Mexico to remove the tariffs. However, we are almost in February, both the tariffs and the retaliation they have caused remained, and members of Congress are becoming more frustrated.

Members of both parties have become more vocal of their demands that the tariffs be removed from both Mexico and Canada before USMCA can come to a vote in Congress. During an appearance at the Washington International Trade Conference, Ways and Means Ranking Member Kevin Brady (R-TX) said that he had heard from both his Republican and Democratic colleagues that they are “not really willing to consider an agreement until steel and aluminum tariffs are ensured to be lifted off.”

Additionally, a bipartisan group of Senators sent a letter to the president and members of his Administration responsible for trade matters pointing out that the president himself had tweeted that the tariffs would be removed as soon as there was a deal. Saying that “tariffs are adding uncertainty to markets and damaging long-term relationships and intricate supply chains,” the group warned that the tariffs are impacting the economy and not accomplishing the stated aim of confronting China.

Although TPA allows for an up-or-down vote, the Administration cannot afford to lose many Republican members, and leaving the 232 tariffs unresolved would seem to guarantee this.

BONUS: CBO Says Tariffs Are Hurting the Economy

In perhaps the most unsurprising trade news in a while, the Congressional Budget Office said yesterday that the Administration’s tariff regime was hurting the economy. As part of its Budget and Economic Outlook, CBO estimated that the new tariffs would reduce GDP by 0.1 percent by 2022 and increase personal consumption expenditures by the same amount. The increase in costs, CBO stated, “will reduce consumer spending by diminishing the purchasing power of consumer income and will reduce investment by making capital goods more expensive.”

January 10, 2019

Although the government continues to be shut down, with no end in sight, there have been some important developments in trade this week.

Government Shutdown Impact on Trade Agencies

It is widely believed that USTR will run out of funding on Monday, meaning that all but a few employees deemed “essential” will be furloughed. That could throw a significant wrench into the many ongoing trade actions that USTR is responsible for, including processing exclusion requests for the Section 301 China tariffs and drafting detailed negotiating objectives for potential deals with the United Kingdom and the EU.

Meanwhile, the International Trade Commission is already being impacted by the shutdown, and their limited operations could mean delays or missed deadlines to provide economic impact reports on trade deals with Japan (January 24), USMCA (March 14), and the EU (March 19), among others. Additionally, it is unclear if scheduled hearings, like the one on the economic impact of a US-UK trade deal scheduled for January 31 will be able to go forward. Additionally, the Section 232 exclusion process at the Department of Commerce has ground to a halt because of the shutdown.

Ways and Means Democrats Add to Their Roster

Yesterday, the Democratic Policy and Steering Committee announced their recommendations for whom should join the Ways and Means Committee, which has jurisdiction over trade issues. Republicans have yet to announce who will take the open seats on their side of the dais. The new Democratic Members slated to join the Committee are:

  • Jimmy Panetta (CA-20), a 2nd term Congressman who served on the Agriculture and Natural Resources Committees last Congress and served in the U.S. Navy and as a Deputy DA before Congress
  • Gwen Moore (WI-4), an 8th term Congresswoman who served on the Financial Services Committee last Congress; she previously worked as a community leader and state legislator
  • Dan Kildee (MI-5), a 4th term Congressman who served on the Financial Services Committee last Congress and was a nonprofit executive before being elected
  • Brad Schneider (IL-10), a 3rd term Congressman who served on the Judiciary, Foreign Affairs, and Small Business Committees last Congress; he is an industrial engineer and previously worked as a management consultant
  • Steven Horsford (NV-4), though newly elected, previously served in the 113th Congress; he previously worked as the CEO of a job training program
  • Stephanie Murphy (FL-7), a 2nd term Congresswoman who served on the Armed Services and Small Business Committees last Congress and previously worked at the Department of Defense and as a business professor
  • Don Beyer (VA-8), a 9th term Congressman who previously served on the Natural Resources and Science, Space, and Technology Committees; he owns a car dealership – growing the “car dealer” caucus on the Committee to two
  • Brendan Boyle (PA-13), a 3rd term Congressman who served on the Budget and Foreign Affairs Committees last Congress; he is an information technology analyst
  • Dwight Evans (PA-2), a 3rd term Congressman who previously served on the Agriculture and Small Business Committees; he is a teacher and community organizer
  • Tom Suozzi (NY-3), a 2nd term Congressman who served on the Armed Forces and Foreign Affairs Committees last Congress; he is attorney by trade

Senate Finance Committee has also announced its new members for the 116th Congress. They are Sens. James Lankford (R-OK), Steve Daines (R-MT), Todd Young (R-IN), Catherine Cortez Masto (D-NV), and Maggie Hassan (D-NH) .

China Negotiations

Negotiators, led by Deputy USTR Jeffrey Gerrish, have concluded their trip to China, where they were tasked with continuing discussions on how to achieve a resolution of the trade dispute between the two countries. The USTR readout does not delve into a great deal of detail or mention whether progress was made. As we have almost reached the halfway point of the 90-day negotiation deadline of March 1, there is still some cautious optimism that a multi-faceted deal could be struck. However, it seems more likely that the Administration may point to progress being made in negotiations and simply push the deadline. Of course, if USTR employees are furloughed for an extended period of time, it could severely impact the plausibility of reaching a deal that would roll back the existing tariffs.

Administration to Push for Increased Power to Levy Tariffs?

Back last summer, there were rumblings of an unfortunately named piece of draft legislation that the Administration was considering – the U.S. Fair and Reciprocal Tariff Act – that would both cripple the WTO and allow the president to unilaterally levy tariffs whenever the whim struck him.

Now, the legislation, which opponents, and the easily-amused internet in general, have taken to calling the U.S. FART Act (seriously, did no one in the White House even look at the initials of those words and anticipate this could be a problem?) seems to have risen from the dead, and there are numerous outlets reporting that President Trump will push for it during his State of the Union address on January 29. Axios has obtained a draft copy of the bill, which I definitely recommend you read.

New Finance Chairman Chuck Grassley threw cold water on the idea yesterday, saying “We ain’t going to give him any greater authority. We already gave him too much.” This backs up Grassley’s early statements on presidential power and tariffs and perhaps even increases the chances that the Finance Committee might make a legislative attempt to reign in the president’s power under Section 232, as Grassley has previously hinted he may be open to doing.

January 3, 2019

Welcome to the 116th Congress! I hope everyone had a nice (and relaxing) break because this year promises to be just as busy in the trade world, as the last one was.

This update will serve as a quick refresher of what happened over the holiday break and what is on the horizon for the next couple of weeks. As always, please reach out if you have questions about any of this or need additional details.

China 301 Tariff Exemptions

USTR announced the first exemptions for its first Section 301 tariff list (the $34 billion version). Around 1000 products were granted the initial exemptions – around 10,000 exemptions have been filed for this list – and USTR’s formal list of product exemption requests can be found here.

A number of steel products were included in the list of exemptions, and other products like radiation therapy systems, workstands for miter saws, thermostats for air conditioning and heating systems, and salad spinners were also included. The complete list of exemptions can be found here.


The U.S. and China continue to discuss a solution to their trade impasse – keeping one eye on the March 1 deadline. As planned, the tariffs on the third ($200 billion) tariff list did not increase to 25% on January 1 as originally scheduled because of the ongoing discussions. They will remain at 10% until March 1 (or whenever President Trump decides to raise them).

The prospects of a large agreement remain questionable, though they may improve if economic data continues in the same vein as Apple’s earnings announcement yesterday. Kevin Hassett, the Chairman of the Council of Economic Advisers, indicated this morning that “a heck of a lot” of U.S. companies will report lower earnings because of the U.S. trade actions. These earnings reports, combined with the Institute for Supply Management index – an indication of U.S. manufacturing health – dropping by the largest margin since October 2008, indicate that the ongoing U.S. trade disputes with our largest trading partners are having a significant impact on businesses and manufacturers in the U.S., as many experts predicted when the tariffs were first announced. If these trends continue, it may put pressure on the Administration and President Trump, who has often pointed to the stock market as an indicator of his success as president, to reach a deal.


We continue to wait on the text of the implementing legislation USTR is preparing. Congressional receipt of that will kick off the next phase of consideration. House Democrats continue to express concern about the environmental and labor provisions, calling into question whether the agreement can pass Congress.

Section 232 Tariffs

The U.S. continues its discussions with Canada and Mexico on removing the steel and aluminum tariffs (and the resulting retaliation). Although there was hope that an agreement could be reached with Mexico before the end of the year, this did not come to pass.

We continue to wait for the report on the Section 232 investigation into autos and auto parts imports that is being prepared by the Commerce Department. The report, and the subsequent decision by the president on whether to impose tariffs, could have wide-ranging effects, including possibly spurring Congressional action to curtail the president’s power to unilaterally impose tariffs. New Senate Finance Committee Chairman Chuck Grassley has seemed open to the possibility, perhaps because farmers – a significant constituency in Iowa – are always substantially impacted by retaliatory action.

New Trade Negotiations

Congress is waiting on detailed negotiating objectives from USTR before the Administration can begin formally negotiating with the EU and the UK under TPA. These negotiating objectives must be received 30 days before negotiations can begin, meaning that nothing can happen until February at the earliest. The negotiating objectives for Japan were released on December 21; therefore, negotiations could begin as early as January 21.

November 30, 2018

This morning, President Trump, joined by Canadian Prime Minister Justin Trudeau and outgoing Mexican President Enrique Peña Nieto, signed the U.S. – Mexico – Canada Agreement (USMCA), which will take the place of NAFTA, while all three were in Buenos Aires for the G20 Summit.

The final text of USMCA (found here) contains slight changes to the sections governing the Canadian dairy industry and LGBT definitions, which House conservatives had demanded the White House change from the original negotiated text.

However, the three countries were unable to finish eleventh hour negotiations to remove the U.S. steel and aluminum tariffs (and the Canadian and Mexican retaliatory tariffs that were placed in response), and all of those tariffs will remain in place for the immediate future. Negotiators have indicated that they hope the completion and signing of USMCA could clear the deck, allowing for quicker negotiations, with the hopes of having the issue dealt with before the end of the year. However, as a word of caution, we heard similar things in September after the original USMCA negotiations were completed.

When looking at the broader trade universe, the signing of USMCA also means that the side letters – focused on a wide variety of issues – are now in effect. Of highest interest will probably be how a potential Section 232 auto tariff would impact Mexico and Canada. In side letters devoted to that issue with both Mexico and Canada, the U.S. agreed to not impose tariffs on passenger vehicles (8703.21 – 8703.90), light trucks (8704.21 – 8704.31), and auto parts for at least 60 days. After that period, 2.6 million passenger vehicles, all light trucks, and $108 billion in auto parts imported from Mexico would be exempt from tariffs. Similarly, 2.6 million passenger vehicles, all light trucks, and $32.4 billion in auto parts imported from Canada would be exempt from tariffs.

All told, the signing marks a significant milestone in the process, and now all attention will turn to Capitol Hill and how the newly divided Congress will address USMCA. Seeing a potentially difficult fight to get USMCA through next year with a Democratic House, 12 Senate Republicans, including Sen. Pat Toomey (PA), Jeff Flake (AZ), Lamar Alexander (TN), and Deb Fischer (NE), urged President Trump to send implementing language to the Hill so the agreement could be passed before the end of 2018. As the days pass, and there is no sign of such language or indications that USTR is working with the Committees of jurisdiction on such language, the slight prospects of that happening seem to grow even more dim.

Most likely, as we have said previously, is that USMCA will have to be addressed in 2019. This could prove potentially challenging, as Democrats will now have control in the House. Moments ago, likely new Speaker of the House Nancy Pelosi said that she and other Democrats were withholding judgement on USMCA. Rep. Bill Pascrell (D-NJ), who could potentially be Chairman of the Subcommittee on Trade for the House Ways and Means Committee, has already expressed significant concern with the lack of enforcement mechanisms, particularly in regards to the labor and environmental sections. You only need to look as the most recent effort by a Republican president with a Democratic House to see how imperiled this could become – President Bush sent implementing language to the U.S.-Colombia Trade Promotion Agreement to Congress in April of 2007, but it did not pass Congress until October of 2011 after President Obama renegotiated portions in order to get Democratic support.

There remain concerns that if the prospects for passage are up in the air next year, it could encourage President Trump to send up notification of a NAFTA withdrawal at the same time he sends up implementing language for USMCA, in an attempt to force Congressional hands. Bipartisan leaders in both the House and Senate, especially those that sit of committees of jurisdiction have repeatedly told the Administration this action would be poorly received on the Hill and could cause significant backlash. Although the president has repeatedly threatened to withdrawal from NAFTA, it remains unclear if he would actually follow through and what the legal implications of such an action would be.

Ultimately, the fight to approve USMCA has only just begun and will likely continue on through at least the first half of next year.

Please reach out if we can be of assistance on USMCA or other trade efforts.

November 28, 2018

In an inauspicious sign for those hoping for a major thaw in trade relations between the U.S. and China, USTR Robert Lighthizer announced today that he would “examine all available tools to equalize the tariffs applied to automobiles” in relation to China.

USTR pointed to China’s current 40 percent tariff on U.S. automobiles as being an egregious sign of the unfair trade practices that the Chinese government takes against the U.S. According to USTR, China imposes a tariff of only 15 percent on other trading partners, and the U.S. applies a tariff of 27.5 percent to Chinese autos.

Today’s statement highlights two of the larger trading issues that the U.S. is currently in the midst of: an ongoing tariff war with Beijing as a result of a Section 301 investigation and the possibility of imposing 25 percent tariffs on autos and auto parts through a Section 232 investigation into foreign imports.

The president suggested this morning that the closing of GM plants in the U.S. could have been avoided with a tariff similar to the so-called “chicken tax” – a 25 percent tariff on foreign-produced pickup trucks and work vans. However, both domestic and foreign car manufacturers have spoken out against the Administration’s proposal on adding new tariffs to autos and auto parts.

There had been high hopes that a meeting between President Trump and Chinese President Xi Jinping, now scheduled to occur over dinner on Saturday at the G20 Summit, could yield real results – including, perhaps, a delay in raising the current 10 percent tariff on $200 billion in Chinese imports to 25 percent that is scheduled to begin in the new year. However, the USTR statement, coupled with the updated Section 301 investigation report released just before Thanksgiving, and various statements from Administration officials in the last several days makes this optimistic position seem less likely.

However, stranger things in the trade world have happened, and all eyes will be on Buenos Aires this weekend.

October 29, 2018

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.

October 16, 2018

Trade Negotiations

As anticipated, USTR notified the Committees with jurisdiction over trade that they would be pursuing new trade negotiations under TPA authority.

The Administration has long expressed a desire for USTR to negotiate with Japan, the United Kingdom, and the European Union, though the timing of these negotiations had been in question. Unlike early reports indicated, the Philippines was not included in the list of countries that USTR would be pursuing.

It is generally understand that that formal negotiations with the UK will not begin until after they formally split with the EU on March 29, 2019 (and which is clearly stated in the USTR letter), and even then may be delayed depending on whether such a split comes after an agreement between the two is nailed down. Additionally, any discussions with the EU are likely to be impacted by those ongoing negotiations. A formal trade negotiation with the EU has been expected for some time, buoyed in part by President Trump’s meeting with EU Commission President Jean-Claude Juncker in July. It is unclear how much the Administration will seek to use some of the frameworks laid out in the Transatlantic Trade and Investment Partnership (TTIP), on which negotiations were halted in 2016.

Like with the EU, negotiations with Japan will likely have to address the Administration’s stated desire to levy tariffs on automobiles and automotive parts. Additionally, currency manipulation and agriculture will likely be  significant sticking points.

Because the Administration has chosen to negotiate under TPA, they must provide detailed negotiating objectives 30 days before beginning any negotiation. Additionally, negotiations cannot begin for at least 90 days, meaning that January 14, 2019 would be the earliest possible day for such discussions to begin.

USMCA Timeline

Senate Majority Leader Mitch McConnell seemed to throw cold water on the notion that Congress would take up NAFTA 2.0 during the Lame Duck session this year. While always seen as a likely priority for next spring, there were some that had hoped Congressional approval could be completed this year. McConnell said during an interview with Bloomberg this morning that USMCA would be a “next year issue” and pointed to the timing requirements of TPA as the primary reason.

McConnell’s announcement comes days after the U.S. International Trade Commission announced that it had begun its investigation into the impacts of the USMCA, as required by TPA. When ITC announced it was beginning its process, it also laid out a schedule on how stakeholders could inform the process:

  • October 29, 2018: Deadline for filing requests to appear at the public hearing
  • October 30, 2018: Deadline for filing prehearing briefs and statements
  • November 15, 2018 and continuing on November 16, 2018 if necessary: Public hearing
  • November 23, 2018: Deadline for filing posthearing briefs
  • December 20, 2018: Written submissions from the public 

301 Exclusion Process

Unlike with the first two lists of products imported from China, USTR chose not to lay out a process by which companies could seek exclusions on the third (and largest) list – which targeted some $200 billion in imports. USTR pointed to the fact that the tariff sits at only 10% currently and won’t be raised to 25% until January as the driving reason. However, as many companies effected have noted, supply chains cannot be easily adjusted in such a short time period.

Therefore, a bipartisan group of 167 members of the House, including Ways and Means Trade Subcommittee Chairman Dave Reichert and a number of his fellow committee members, sent a letter to USTR urging them to reconsider. Whether it will ultimately lead to changes remains unclear, but it is a good first step.

October 1, 2018

USMCA is Agreed to… What are the TPA Deadlines to Be Aware of?

TPA Timeline – Administration Deadlines
Because the Trump Administration chose to renegotiate NAFTA under the authority granted by Trade Promotion Authority (TPA), there is a very specific timeline that both the Administration and Congress must follow – although, like with anything in Washington, each house of Congress has control over its own rules, so that could attempt to alter the Congressional timeline.
With the announcement of the deal and release of text of the agreement last night, the Administration has kick started the clock for a series of reports and actions that they must meet. The three countries met their goal of completing negotiations by September 30, in order for each country’s leader to sign the agreement before the new Mexican president takes office of December 1.
Here are the next steps that the Administration must meet:
  • USMCA is expected to be signed on November 29
  • A list of changes to U.S. law is due by January 28, 2019
  • The U.S. International Trade Commission has until March 14, 2019 to release a report on the agreement (this report may be released earlier than this deadline)
While the various Administration agencies are working to meet these deadlines, they will also be working with Congress to draft the implementation language. 30 days before submitting implementing language, the Administration must submit to Congress a Statement of Administration Action (SAA) and the final text of the agreement.
TPA Timeline – Congressional Deadlines
Once the Administration meets its obligations as described above, the attention will turn to Congress. As soon as the President submits the implementing bill to Congress, it sets off a new timeline. As laid out in TPA, the implementing legislation will stay in Congress no more than 90 session days (the “days” described below should be interpreted as days that the body is in session, not calendar days):
  • No more than 45 days after the implementing bill is introduced, the House Ways and Means must report the bill from the Committee or it is automatically discharged.
  • No more than 15 days after the bill is discharged from the Committee, the House of Representatives must vote on the bill.
  • No more than 15 days after the Senate receives the bill from the House, the Senate Finance Committee must report the bill out of Committee or it is automatically discharged.
  • No more than 15 days after the bill comes out of the Finance Committee, it mustreceive a full vote in the Senate.
The implementing legislation is then signed by the President and the implements the agreement by proclamation.
Looking Forward
With the timeline laid out above, it is likely that consideration of the new USMCA will be considered by Congress next Spring – though an exact date will not be known until the Administration completes its obligations first.
There have been some that have suggested that that USMCA could be signed and implemented during the Lame Duck session of Congress. We find that to be a very unlikely scenario; the time frame is simply too condensed. 
Therefore, the midterm elections could have an impact on the fate of USMCA, depending on which party has control of each house come January.

September 30, 2018

American and Canadian officials have confirmed that a trilateral NAFTA deal was reached late on Sunday.
Until earlier today, the fate of the agreement remained up in the air, as there were issues that remained unsolved. Like with all trade agreements, the details will be crucial to understanding the changes that were made to the existing agreement.
Text of the agreement has yet to be released but is expected soon, in order to comply with the TPA deadline. We will keep you updated and expect to release an in-depth look at the agreement tomorrow.

September 18, 2018

As we expected when the Trump Administration announced that 10% would be levied against its latest list of 5,745 Chinese imports would be implemented on September 24, China announced today that it would retaliate.

The Chinese Ministry of Commerce said that 10% tariffs would be levied against 3,571 products found in two lists (here and here) and 5% tariffs would be levied against 1,636 products in two other lists (here and here). They will also go into effect on September 24. The four lists were originally put out by the Chinese on August 3, and were originally set to be hit with four separate tariff rates.

The products included on these lists will effect a wide swath of industries that export goods to China. In addition to coffee beans, chemicals, meat, and computers, the Chinese also targeted liquefied natural gas. China has now levied tariffs against the vast majority of American exports. Last year, China exported $129.89 billion in goods to the U.S., and tariffs now cover $110 billion of those products.

Yesterday, in his statement announcing the tariffs, President Trump said that the U.S. would pursue a final list with $267 billion in Chinese products if China retaliated in any way. Therefore, it seems likely that another round of U.S. tariffs could be announced in the near term.

Finally, if you are still catching up on yesterday’s trade news, Prime has compiled the list of products that have been removed from the final list. You can find our list here.

September 17, 2018 (Update Part II)

When USTR released its final list of Chinese imports that would be subject to 10% tariffs on September 24, it announced that the list contained 5,745 full or partial tariff lines (out of the original 6,031).

USTR’s final list contains 11 tariff lines that have 10-digit product exemptions, which can be found at the end of their list, and includes items such as child safety seats, highchairs, play yards for children, and infant walkers.

We have put compiled the list of products that have been removed from the final list. You can find our list here.

September 17, 2018 (Update Part I)

As anticipated, the U.S. announced this afternoon that it would implement a list of approximately $200 billion in Chinese imports.

There was some hope last week that discussions around restarting high level trade talks between the U.S. and China could delay the implementation of those tariffs, but the Administration, particularly President Trump, seemed to reject that notion over the weekend. Additionally, before the list was announced, NEC Director Larry Kudlow said that Chinese economic reform efforts were “moving in the wrong direction,” indicating perhaps that the Administration’s leverage was not producing the desired effects, and they felt that doubling down might work.

With the implementation of this list, which will come September 24, the U.S. has now levied tariffs against $250 billion in Chinese products. That is almost half of the $505 billion in Chinese products that were imported into the U.S. in 2017. The only bright spot in the Administration’s announcement was that the tariffs would start out at 10% but would increase to 25% on January 1, 2019.  This coincides with the original USTR announcement had reflected the 10% number, but a follow-up notice that pushed back the comment period referenced the 25% rate.

President Trump’s statement also says that if China retaliates, the U.S. would pursue a $267 billion list, meaning that virtually every product imported into the U.S. from China would have tariffs levied against it. China is expected to retaliate with $60 billion in tariffs on 5207 tariff lines, at rates of between 5% and 25% (for those lists, please refer to our August 3 update).

After an initial examination of the new list, it appears that around 300 tariff lines were removed from the initial lists. Press reports indicated that a line used for Apple products, like their watch, were removed. Additional removals include chemicals used for manufacturing, plastic gloves, and some agricultural goods. I will send around a complete list of products that were removed from the list as soon as I am able to put it together.

September 10, 2018

Tomorrow, the Department of Commerce’s Bureau of Industry and Security will submit to the Federal Register a rule that makes alterations to the Department’s exclusion process for the 232 steel and aluminum tariffs.
Comments must be received by November 10. It is important to note that Commerce asks that parties comment only on whether the changes made to the exclusion process will address some (or all) of the well-publicized problems with the process that are detailed in this rule, not the overall exclusion process.

The new rule details changes to the process. Some of the highlights:

  • Most importantly, the Department will grant properly filed exclusion requests which meet the requisite criteria, receive no objections, and present no national security concerns. This will help to address the series exclusion request backlog that exists. 
  • Companies that submit an exclusion request or objection will now have the opportunity to respond to information submitted by the other party
  • Makes explicit changes to submit and protect confidential business information
  • Adds an explanation for companies that details how an exclusion request can be submitted for a country that has been granted a country exemption
  • Provides greater detail on the criteria the Department will consider in reviewing the exclusion request
  • Details what rebuttal (and subsequent subrebuttal) comments should address, as well as establishes a 7-day rebuttal period
  • With the new rebuttal process, the Department will also grandfather in
    exclusion requests already posted, but not yet fully adjudicated, to be reopened to allow for rebuttals, as well as subrebuttals
  • Adds a caveat that the Department may allow for a longer (or shorter) exclusion period. The previous rule allowed for a 1-year exclusion.
Because of the length of the rule and the shear number of changes made by this rule to the interim rule, this list does not detail  some of the smaller changes made to the process. Please let me know if you have additional questions on this exclusion process or if we can assist you in any way.

September 7, 2018

Moments ago, while speaking to reporters on Air Force One, President Trump announced that the Administration had finished an additional list of imports from China on which to place tariffs.

He said this list would account for $267 BILLION (not a typo) in goods. It would be separate from the $200 billion list, on which the comment period closed last night.

USTR has not yet released such a list, but I felt it was important to flag for everyone. It is consistent with past Administration positions that they were willing to place tariffs on all Chinese goods coming into the U.S.

August 27, 2018

The United States and Mexico announced that they had reached a “handshake agreement” on bilateral issues contained within NAFTA, with the exception of one issue that Mexican negotiators refused to name. It is important to note that this announcement does not mean that a deal on NAFTA modernization is complete, as Canada has not been involved in these negotiations for five weeks.

President Trump’s Announcement

There is some confusion – like with many trade actions the Administration has taken – as the President said in his statement from the Oval Office that the they were “getting rid” of the name NAFTA because “it has a bad connotation because the U.S. was hurt very badly by it.” Instead, Trump said it would be a bilateral deal called the U.S.-Mexico Trade Agreement that Canada could join later. However, this contradicts what other Mexican and American officials have said, that the deal will remain trilateral.

Notably, while on the phone, the Mexican President persisted in calling it NAFTA. And, after his (rather strange) appearance via conference call to Trump’s NAFTA announcement, the Mexican President reiterated that Canada must be included in any agreement – seeming to throw cold water on President Trump’s “announcement” of a bilateral deal.

Trump also said he would “terminate” the existing deal, though he did not say if he would do it before or after this new trade deal is ratified. It also should be noted that negotiations were based on the assumption of a trilateral deal, so splitting NAFTA into two separate agreements (one with Mexico, and the other with Canada) would require that there be additional negotiations to resolve unsettled issues.

Additionally, Congressional trade leaders have maintained that the Administration cannot turn a trilateral deal into a bilateral deal without Congressional approval – even though USTR’s statement seems to indicate that POTUS thinks he can.

The sudden hard push to finalize negotiations is due to the change in Mexican government that will take place on December 1. The Trade Promotion Authority that the president is utilizing to renegotiate NAFTA lays out a 90-day clock that starts when Congress has been notified of such a deal. In order to have the current Mexican President Enrique Peña Nieto sign this agreement, it needs to be finished by September 1 at the very latest. Otherwise, Andrés Manuel López Obrador, the incoming President could demand changes – he has expressed concerns about the privatization of the Mexican oil industry that are included in NAFTA.

Agreement Details

Some details that have been released on the agreement between Mexico and the U.S. American demands to change automobile rules of origin had long been a sticking point between the two countries, but this agreement would require 75% of auto content to be made in North America in order to qualify for duty-free treatment; NAFTA currently requires 62.5%. The new agreement would also require 70% of steel, glass, and aluminum used in these autos come from North America. Additionally, a substantial portion (40% for passenger vehicles and 45% for light trucks) of each vehicle would be required to be manufactured in a “high wage factory” – one that pats wages equal to $16/hour.

However, details on the rest of the agreement remain scant. There was some indication that a scaled-down version of the sunset clause had been agreed to, as well as changes to ISDS provisions, though those were unconfirmed and without a lot of detail. USTR Lighthizer said the Administration would send its notification letter to Congress on Friday, so we may have to wait until then to answer many of the questions that are swirling.

Negotiations with Canada are scheduled to begin “shortly” – probably later today or Tuesday. Mexican trade officials have said that trilateral negotiations will require about a week to complete, but there remain significant issues between the U.S. and Canada that must be ironed out, specifically in relation to U.S. demands that Canada open its highly restrictive dairy market.

Finally, we would caution that a preliminary deal does not mean a final deal. The White House has announced a number of “deals,” including most recently on trade with the EU that remain nebulous and incomplete at best.

August 8, 2018

In response to the Trump Administration’s announcement yesterday that they had finalized a second wave of $16 billion in tariffs on Chinese products (complete coverage of that can be found here), the Chinese announced that they too would implement tariffs on approximately $16 billion in products.

The Chinese Ministry of Commerce said that the new list of products that would be hit with the 25% tariffs would be implemented in parallel to the U.S. action. The Chinese list of products can be found here, and Prime’s translated version, which matches the HS tariff to the list the Chinese released (so there may be slight translation differences) can be found here.

The list released today is a substantially expanded list of 333 tariff lines, as the original list (Prime’s English version) consisted of only 114 tariff lines.

With the release of today’s list (and the finalization of yesterday’s list by the U.S.), both countries will have placed tariffs on $50 billion of imports as a result – and the retaliation for – the section 301 investigation. The U.S. is considering tariffs on $200 billion worth of additional Chinese products, and today’s announcement by the Chinese may lead to consideration of even more tariffs by this Administration.

August 7, 2018

Today, USTR finalized its second list of Chinese tariffs, which were originally announced as part of the response to the section 301 investigation.

This list includes approximately $16 billion in Chinese goods that are imported into the United States. Tariffs of 25% will be placed on all of these goods effective August 23.

Like the first list, which was finalized earlier this summer, there will be an exclusion process for companies and trade associations that are effected by the tariffs. The complete process to apply for exclusions for this tranche of tariffs will be announced in the near future.

According to USTR, 279 of the original 284 tariff lines are included in this list. The five lines that were removed are:

  • 3913.10.00 – Alginic acid, and its salts and esters, in primary forms
  • 8465.96.00 – Splitting, slicing or paring machines for working wood, cork, bone, hard rubber, hard plastics or similar hard materials
  • 8609.00.00 – Containers (including containers for transport of fluids) specially designed and equipped for carriage by one or more modes of transport
  • 8905.90.10 – Floating docks
  • 9027.90.20 – Microtomes

August 3, 2018

This morning, in response to the list of $200 billion in imports that the U.S. is targeting for tariffs, as well as the announcement earlier this week that those products may be hit by a 25% tariff instead of the originally announced 10%, China announced that it would target $60 billion in U.S. products that are imported into the country.
statement from the Ministry of Commerce said that these products would be hit by tariffs ranging from 5% to 25%. In total, 5207 tariff lines will be hit – 2493 with the 25% tariff, 1078 with a 20% tariff, 974 with a 10% tariff, and 662 with a 5% tariff. Among the items that were affected include 3D printers, honey, coffee, snowblowers, and a variety of chemicals.
You will see the tariff lists above in Chinese, but we are working to translate the line items and will send out a complete list in English when we have one.
This announcement by the Chinese will likely not go over well with the President. He has used past retaliatory actions as reasons to impose additional tariffs on Chinese products and has indicated a willingness to target ever Chinese good imported into the U.S. if necessary.

August 1, 2018

As several unconfirmed reports indicated last night, the White House announced a short time ago that it was considering increasing the tariffs on a  proposed list of products imported from China, totaling some $200 billion, from 10% to 25%.
Though a formal notice in the Federal Register has not yet been issued, in a statement attributed to USTR Lighthizer, the Administration indicated that a notice would be published “shortly.”

As a consequence of making this announcement in the middle of the comment period, USTR has extended both the comment due date and the date by which to send notice that you would like to appear at the public hearing on this topic.

USTR said that comments on the tariff code list may now also cover the proposed change in tariff rates.
Comments are now due by September 5.
Requests to appear at the August 20-23 public hearing are now due by August 13.
Several Administration officials indicated that the decision to increase the proposed tariff level is an attempt to get China back to the negotiating table. As we (and others) have reported, there have been no high-level trade discussions between the U.S. and China for an extended period of time.

July 27, 2018

As Congress winds down and prepares to take a break (though possibly shortened in the Senate’s case), the trade world continues to move at a rapid rate. This past week has been an especially newsy one on the trade front, with action in every one of the closest watched sectors. For more information on the Administration’s efforts to blunt the impact of retaliatory tariffs on the agricultural sector, please see our update from Tuesday.

European Union 

The trade news that received the most headlines this week was the meeting between President Trump and Jean-Claude Juncker, the president of the European Commission. The meeting generated perhaps the most positive sign of a thaw in trade relations between the two since the U.S. imposed steel and aluminum tariffs. In a joint statement, Trump and Juncker agreed to “work toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods… reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans.”

However, there were no concrete steps taken by either country to agree to remove any tariffs that had been placed in recent months. Further, the agriculture piece of the statement seems to have been interpreted in two completely different ways. The Trump Administration was quick to say that the deal included all agricultural products, not just soybeans, while EU officials said that agriculture would not be included in future discussion. Agricultural issues have been notoriously contentious between the U.S. and EU, and many were quick to point out that Juncker ultimately had no power to force EU countries or companies to import more agricultural products from the U.S.

During a press conference after the meeting, President Trump said the U.S. would hold off on implementing additional tariff action “unless either party terminates the negotiation,” seeming to suggest that the EU would be granted a waiver or exemption if tariffs were levied on foreign auto imports in the coming months. This is, obviously, welcome news. However, it is important to realize that the Trump Administration has demonstrated a willingness to change positions in similar situations. Less than two weeks after Treasury Secretary said that the U.S had “agreed to put the tariffs on hold” while negotiating a deal with China, the U.S. announced that those same tariffs would actually be implemented. A month (or however long it takes to conclude the 232 auto investigation) is a long time in this atmosphere, and an exemption should in no way be considered a foregone conclusion until it is included in a formal, written announcement by the Administration.


There continues to be a lack of substantive high-level discussions between the U.S. and China to resolve the ongoing, and ever escalating trade dispute. The lack of such discussions has been increasingly concerning to Congress, and on Wednesday Republican members of the House Ways and Means Committee sent a letter to the President expressing that he engage directly with Chinese President Xi to reach a conclusion to the ongoing issues.

China, while not yet announcing their next phase of retaliation in response to the most recent list of proposed by the U.S., has taken steps to implement non-tariff barriers that many have feared. Wednesday, Qualcomm announced that it was being forced to abandon a proposed acquisition of NXP Semiconductors because Chinese regulators had refused to give their approval, even after the deal had been approved by antitrust officials in eight other countries – including the U.S. Facebook was also denied the opportunity to establish a subsidiary in the Chinese province of Zhejiang.

While the Chinese have said that these actions are in no way related to the ongoing tariff dispute, there is little doubt that does not match with reality, and these high-profile rejections are a preview of what it likely to occur if an agreement is not reached. Because the U.S. only exports about $147 billion in goods to China, the Chinese will be forced to look in another areas to retaliate equally against the U.S. Regulatory action, allowing U.S. produce imports to sit in port until they spoil, and boycotts of American products and brands are likely to increase in the coming weeks. These actions could potentially cause significant harm to American companies conducting business in China.

As a brief reminder, requests to appear at USTR’s hearing on the proposed $200 billion tariff list, as well as a summary of expected testimony is due today. Comments on USTR’s second list of goods to put tariffs on were due Monday, and that list is expected to be finalized and implemented in the next several weeks.

232 Auto Tariffs 

While the discussions with the EU may limit the impact of such tariffs (though, again, I urge caution when thinking that the EU is out of the woods on this issue), the Commerce Department is continuing with its investigation into whether the import of autos and auto parts constitutes a national security threat. The timeline for the conclusion of such an investigation still seems to be before the end of September – likely sometime in August – and seems almost certain to reach the conclusion that imports of these products should face tariffs.

In order to head off some of the consequences that will emanate from such a decision, Senators Doug Jones (D-AL), Lamar Alexander (R-TN), Lindsey Graham (R-SC), and Bob Corker (R-TN) introduced legislation that would require the International Trade Commission to study the “economic well-being, health, and vitality of the United States automotive industry” before any 232 automotive tariffs could be applied. The Senators represent states that have seen significant investments made by foreign automobile manufacturers and would likely be greatly impacted by the proposed tariffs.

While the majority of House and Senate Members have been hesitant to take steps to curtail the President’s use of tariffs, a decision to implement automotive tariffs could be a catalyst for them to take such action.


There were positive signals that NAFTA negotiations will resume in short order after taking a hiatus due to the Mexican presidential election. In his testimony before the Senate Appropriations Committee yesterday, USTR Lighthizer expressed confidence that a conclusion of negotiations with Mexico would reach “some kind of a conclusion” before the end of August. If an agreement wasn’t reached with them by this date, USTR would not be able to meet the 90-day congressional notification deadline that was set out in TPA before the current Mexican president leaves office on December 1, thus necessitating negotiations with the new Mexican Administration.

In a letter sent to President Trump, president-elect Andrés Manuel López Obrador (colloquially known as AMLO) said that it was important “to conclude the renegotiation of the North American Free Trade Agreement” because “prolonging the uncertainty could slow down investments in the medium and long-term.” The letter also said that AMLO’s transition team would participate in coordination with the current Mexican team. President Trump’s response that negotiations must go “quickly” or that “otherwise [he would] go a much different route… [that] would be far more profitable for the United States and its taxpayers.”

However, for all the talk of moving quickly, there are no signs that the U.S. is interested in moving away from its most controversial demands, including the sunset clause. Yesterday, Ambassador Lighthizer again reiterated the need for such a provision, but he received significant pushback from members of the Subcommittee, with Members saying that a provision would likely cause a renegotiated NAFTA to lose necessary Republican votes.

Miscellaneous Tariff Bill 

Yesterday, the Senate passed its amended version of the Miscellaneous Tariff Bill (MTB) Act of 2017, H.R. 4318, by voice vote. The bill differs slightly from the version that had previously passed the House by a 402-0 vote in January due to an amendment added by Finance Chairman Orrin Hatch (R-UT). The amendment removes the sections on propargyl butycarbamate, esfenvalerate, and collapsible insulated food and beverage bags, while also making changes to the sections on ski and snowboard boots, men’s shoes with outer soles and uppers of rubber or plastics valued over $3 but not over $6.50 per pair, and men’s shoes with outer soles and uppers of rubber or plastics valued over $6.50 but not over $12 per pair. Because of the changes, the legislation will, once again, have to pass the House, probably in September when that body returns from August recess.

This legislation implements some 1,800 of the 2,500 recommendations on raw and intermediate goods from the International Trade Commission (ITC) report on which tariffs to adjust or suspend, a result of American businesses petition for such changes. MTB legislation has, in the past, moved expeditiously. However, the previous authorization had expired in 2012 and further attempts ran afoul of the House ban on earmarks.

July 24, 2018

In a bid to blunt the impact of the President’s tariffs on a wide range of products, and the retaliation that they have engendered, the Administration announced a plan to give $12 billion in subsidies to farmers.
The Department of Agriculture will a Depression-Era relic, the Commodity Credit Corporation (CCC), in an attempt to aid farmers who have seen commodity prices plunge in recent months. The CCC, which was chartered in 1933, was tasked to “stabilize, support, and protect farm income and prices.” Importantly for the Administration’s goals, the CCC has the ability to borrow up to $30 billion from the U.S. Treasury.
Specifically, USDA said that it will use the Market Facilitation program to “provide payments incrementally to producers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs.” USDA will also use the CCC Charter Act to implement a Food Purchase and Distribution Program “to purchase unexpected surplus of affected commodities” and a Trade Promotion Program administered by the Foreign Agriculture Service “to assist in developing new export markets.”
The announcement was not completely unexpected, as the Administration works to head off the impact of its tariff on one of its more important constituencies. Farmers and ranchers were hit particularity hard in the retaliation for both the Section 232 steel and aluminum tariffs and the Section 301 tariffs on China, and there were increasing signs that the retaliation may present electoral problems for farm-state Republicans in November. These subsidies will seek to dampen their impact, though this program will not provide any relief for farming-adjacent industries.
Interestingly, this is not the first time in recent years that an administration has been charged with using the CCC for at least partially political reasons. In 2010, then-President Obama’s USDA Secretary acquiesced to requests from then-Senate Agriculture Chairwoman Blanche Lincoln (D-AR) to aid farmers in her home state. Republicans charged that this action was meant to aid in her bid for reelection, which was ultimately unsuccessful. In response, Congress placed restrictions on the use of CCC funding in 2012. Those restrictions were quietly rescinded in this year’s omnibus funding legislation.
As expected, the announcement received a chilly reception amongst Republicans on Capitol Hill, especially in the Senate, where it was called everything from “welfare” (Sen. Bob Corker, R-TN) to a “Band-Aid” (Sen. John Thune, R-SD) to “more and more like a Soviet-type of economy” (Sen. Ron Johnson, R-WI) to “golden crutches… that aren’t going to make America great again, they’re just going to make it 1929 again (Sen. Ben Sasse, R-NE).

July 10, 2018, Part II

The United States Trade Represented released its long-awaited (and dreaded) list of $200 billion – not a typo – in Chinese products that the U.S. is proposing to place tariffs on.

Products on the list include include a wide variety of types of seafood, produce, minerals and ores, chemicals, tools, antiques, pet supplies, leather goods, electrical equipment and goods, furniture, various parts for motor vehicles and heavy machinery like tractors, elevators, offshore drilling platforms and equipment, glass, clothing and thousands of other products.

Requests to appear at the hearing on this list, as well as a summary of expected testimony is due July 27.

Written comments on the list are due August 17.

A hearing will take place August 20-23.

The list stems from a directive given by President Trump on June 18. The President has tied this increase in tariff action to Chinese retaliation against the original $50 billion in tariffs that resulted from USTR’s section 301 investigation, as well as ambiguous “Chinese practices.”

The combination of these two proposed tariff lists, reaching $250 billion, would account for about half of all Chinese goods imported into the U.S. in 2017.

If enacted, these tariffs will mark a clear escalation in trade hostilities between the U.S. and China. China has already promised a dollar-for-dollar retaliation for any actions taken by the United States. As we’ve mentioned in past editions of Tracking Tariffs and Trade – and it bears repeating – the U.S. only exported about $147 billion in goods to China in 2017. Therefore, any retaliation taken by the Chinese above that amount would likely be taken against services trade, including financial services, or by non-tariff action including regulatory and market access restrictions.

This list is likely to ramp up the concern on the Hill regarding the Administration’s trade actions, as well. Tomorrow, the Senate will take up a nonbinding sense of the Senate measure to express their opinion that Congress should play some role in levying tariffs, like those as a result of section 232. Sen. Flake, one of the measures supporters, told reporters that he expects a majority of both the Democratic and Republican caucuses to support the measure.


July 10, 2018

Today, USTR announced the process by which stakeholders can apply for product exclusions for the 301 tariffs that went into effect last Friday, July 6.

Interestingly, the USTR announcement specifically states that exemptions may be sought by trade associations on behalf of their members, a provision that was not explicit in the Department of Commerce process for section 232 product exemptions.

Product exclusion requests, based on the 10 digit subheading of the covered tariff, that contain “the identity of the producer, importer, ultimate consumer, actual use or chief use, or trademarks or tradenames” will not be considered by USTR. 

Additionally, exclusion requests must include the annual quantity and value of the Chinese-origin product (trade associations should base this information of their members’ data); whether the products is available only from China; whether the imposition would cause severe economic harm to the requester or other U.S. interests, and whether the product is “strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs.

Requests for exclusions are due to USTR by October 9.

Once an exclusion request is posted on the docket (USTR 2018-0025), parties will have 14 days to respond, and there will be a subsequent 7 day period for replies to those responses.

Exclusions from the section 301 tariffs will be effective for one year after the publication of the exclusion determination and retroactive to July 6, 2018.

June 21, 2018

This is just a quick update to inform you that the period by which to submit comments on the Department of Commerce’s proposed 232 investigation into autos and auto parts has been extended.

Comments and requests to appear at a hearing on the issue are now due by June 29 (next Friday).

Rebuttal comments are now due by July 13.

For more details on the proposed action, please see our May 23 update.

June 18, 2018

Like he promised on Friday when announcing that the $50 billion in proposed tariffs against China would go through, President Trump has instructed USTR to study adding additional tariffs for Chinese products imported into the U.S. because of Chinese retaliatory tariffs (in response to the 301 tariffs).

In a statement released tonight, the Administration stated that USTR would study and release a list of $200 billion – not a typo – in Chinese goods against which 10% tariffs could be levied, with further promises to keeping adding to the tariffs ($200 billion at a time) if China doesn’t “change its practices” AND relent on the retaliatory tariffs that they announced on Friday (Prime’s English versions can be found here and here).

It is likely that China will respond in a similar manner. However, it is important to remember that China only imports around $130 billion in American products. Therefore, should they retaliate, they will be forced to expand their scope to match U.S. actions dollar-for-dollar. Services, visas, and investment are likely to be at the top of any such list.

Additionally, in a rebuke to the Administration, Senators refused to remove the provision in the National Defense Authorization Act that would essentially undo the “deal” struck between the Department of Commerce and the Chinese government to allow Chinese telecom firm ZTE to continue to operate in the U.S. after it was found to have violated a 2017 agreement by doing business with North Korea and Iran.

Our full coverage on the ongoing US-China trade dispute (which is quickly escalating to become a full-on trade war) can be found here.

June 16, 2018

When the U.S. announced its list of tariffs – in two parts – on $50 billion in Chinese goods (the first list of 818 (out of the 1,333) products will go into effect on July 6) and the new set of 284 products will go into effect after further public comment, the Chinese government stated that it would retaliate immediately.

When the results of the Section 310 investigation by was originally announced by USTR in early April, China released a preliminary tariff list laying out the products that it was planning to retaliate. Today, they revised that list, though much of it remained the same, with some significant additions.

Like the American tariff list, the Chinese split their list into two different parts. The first list contains 545 tariff lines, constituting $34 billion – mainly focused on agriculture, food, cars, and aquatic products. It will be implemented July 6 to coincide with the American tariffs. The Chinese list can be found here, and Prime’s list of the tariffs in English can be found here (our list matches the HS tariff codes to the list the Chinese released, so there may be slight translation differences).

The second Chinese tariff list (Prime’s English version here) consists of 114 products that will be implemented as soon as the second American tariff list goes into effect. In addition to various chemicals and medical equipment, this list also includes energy products like coal, lubricating oils, diesel oils, and various bitumen products.

In his announcement this morning, President Trump said that the U.S. would retaliate against any tariff action taken by the Chinese. With the implementation of these tariffs, it increases the likelihood that the U.S. will levy additional tariffs, perhaps even the $100 billion in additional tariffs that President Trump instructed USTR to study in April. USTR has not released a list of what products such a list would incorporate, but it would almost certainly have to include a number of consumer products.

June 15, 2018

This morning, President Trump announced that the 25% tariffs on $50 billion in Chinese imports will, indeed, be implemented.

The products that were originally included on a list published by the United States Trade Representative and put up for public comment, focused on a number of goods that were included in China’s Made in China 2025 program.

The $50 billion in tariffs will be applied to 818 (out of the 1,333) products that were included on the original USTR list. These products cover around $34 billion in Chinese imports. The other $16 billion in tariffs will come on an entirely new set of 284 products, which USTR says will undergo a public comment period (there has not yet been a timeline given).

Additionally, in his announcement this morning, President Trump threatened to levy additional tariffs should the China retaliate. China has already stated that it will retaliate; several months ago it released a target list of American imports – consisting of a number of high-value agricultural targets, including soybeans. Our complete coverage on this issue can be found here.

The U.S. implementation of these tariffs, which Treasury Secretary Mnuchin said it was backing away from only a month ago, could also threaten a number of deals the Administration has struck with the Chinese government in recent weeks. As part of a trade deal to Beijing led by Commerce Secretary Ross, the Chinese agreed to buy $70 billion in agriculture and energy products only 10 days ago. That deal seemed to be conditional on these tariffs not being implemented, so it seems likely it will be taken off the table.

June 6, 2018

Senator Bob Corker (R-TN) formally introduced his billtoday to reign in the power of the Executive Branch to levy tariffs using Section 232.

The legislation would give Congress 60 days to review and vote on any tariffs imposed under Section 232, which the current Administration has used to levy tariffs on some of America’s closest allies and trading partners. The bill would also be retroactive for two years, theoretically giving Congress power to rescind the 232 steel and aluminum tariffs, as well as to prevent any possible tariffs on autos or auto parts that the Administration may implement after the conclusion of the investigation they launched into that sector several weeks ago.

Notably, Corker’s bill has 9 cosponsors – 5 Republicans and 4 Democrats: Sens. Heidi Heitkamp (D-ND), Pat Toomey (R-PA), Mark Warner (D-VA), Lamar Alexander (R-TN), Brian Schatz (D-HI), Ron Johnson (R-WI), Chris Van Hollen (D-MD), Mike Lee (R-UT), and Jeff Flake (R-AZ) – a rather interesting group that spans much of the ideological spectrum in the Senate.

Corker has indicated that he will attempt to get his bill added to the National Defense Authorization Act (NDAA). That seems unlikely, however, as it is must-pass legislation and this tariff provision would likely cause it to be vetoed by the president. However, if Corker forces a vote on this bill as an amendment, it could reveal how much actual support there is on both sides of the aisle to take on the president’s trade power.

The Senate version of the NDAA is also receiving additional trade attention because it contains reforms to the CFIUS process. The text of the legislation, which was released early this morning, contains the Foreign Investment Risk Review Modernization Act (FIRRMA), S. 2098, which was marked up and reported out of the Senate Banking Committee. FIRRMA is bipartisan legislation, with Sen. John Cornyn (R-TX) and Sen. Dianne Feinstein (D-CA) serving as the primary sponsors of the legislation, which had 11 additional cosponsors.

The CFIUS legislation included in NDAA would create a process to identify critical technology that is not subject to export control, and mandate that CFIUS review transactions involving those technologies to ensure that they don’t constitute a risk to national security. The new CFIUS language also sets up a process for companies to challenge CFIUS decisions that block transactions. Finally, the measure would require a report by the Secretary of Commerce on the foreign direct investment by China, including a breakdown by value, NAICS code, and investment type. The report would also be mandated to include the number of U.S. affiliates under the control of China, U.S. companies purchased by China, and an investigation into the pattern of Chinese investment. Prime’s previous CFIUS coverage can be found here.

May 31, 2018 (Update II)

This morning, when the U.S. announced that it would no longer exempt the EU, Canada, and Mexico from its steel and aluminum tariffs, we said that we expected Canada to issue retaliatory tariffs.

Moments ago, the Canadian government did precisely that. Prime Minister Justin Trudeau, in perhaps his strongest statement against President Trump and the U.S., stated that it was “an affront” to Canadian soldiers who died fighting next to Americans for the U.S. government to say that Canada was in any way a threat to national security. Further, he stated that Canada believed that “at some point, common sense will prevail… [but there is] no sign of that action today by the U.S. Administration.”

Canadian Minister of Foreign Affairs Chrystia Freeland then took the stage to announce that there would be a dollar-for-dollar tariff retaliation for the tariffs levied by the U.S. She stated that the Canadian government would issue 25% and 10% tariffs on $16.6 billion in imported American goods. These tariffs will go into effect on July 1. A complete list of products that will be effected can be found here.

The tariffs hit a wide variety of American industries. In addition to various steel and aluminum products, the Canadians hit toilet paper, pizza, chocolate, water, coffee, ballpoint pens, frozen quiche, and scores of other imports.

There is an opportunity for Canadian companies and individuals to comment on this list. Comments must be received by June 15, and the requirements for such comments, as well as where to send them, can be found here.

In the press conference announcing these tariffs, the Prime Minister also made NAFTA news. Saying that (earlier this week) he felt a deal was close, Trudeau offered to come to the U.S. to finalize an agreement. However, U.S. Vice President Pence called him on Tuesday to state that agreeing to the U.S.-offered five-year sunset clause would be a precondition of such a visit. Trudeau refused to agree to such a stipulation and the visit was cancelled. If the U.S. is still insistent on a sunset clause, it would seem to indicate that a NAFTA deal is as far away from completion as it could be.

May 31, 2018

As we mentioned was likely in our tariff overview piece yesterday, the White House announced that it will end the Section 232 steel and aluminum tariff exemptions for the EU, Canada and Mexico.

Imported steel will now be hit with a 25% tariffs and imported aluminum will face a 10% tariff as of 12:01 tomorrow morning (June 1).

Canada represents 17% of all U.S. steel imports, and 90% of all Canadian exports (around $5 billion per year) are destined for the U.S.

This move by the Trump Administration against arguably the closest U.S. trading partners will likely have a significant impact on other trade actions.

As the U.S. is in the midst of attempting to renegotiate NAFTA, there is no doubt that these tariffs will further complicate the already complicated process. Commerce Secretary Wilbur Ross explicitly tied the imposition of steel and aluminum tariffs on Canada and Mexico to stalled NAFTA talks saying, “those talks are taking longer than we had hoped. There is no longer a very precise date when they may be concluded, and therefore [Canada and Mexico] were added into the list of those who will bear tariffs.”

Canadian Foreign Affairs Minister Chrystia Freeland was scheduled to be in Washington for several days of trade meetings this week. However, she unexpectedly cut her visit short. Freeland stated that it was “frankly absurd” that the U.S. would consider Canada a national security threat and threatened to retaliate against any tariffs, saying that the Canadian government “is absolutely prepared to and will defend Canadian industries and Canadian jobs.” Canadian officials are said to be considering various tariff approaches, including specifically targeting the American agricultural sector because it is among the most vulnerable to retaliatory trade measures.

Any tariffs levied by Canada (and possibly Mexico) will likely share similarities to those approved by the EU in response to the U.S. steel and aluminum tariffs.

The EU tariffs – 25% on $3.34 billion in goods – will go into effect on June 20. These tariffs will cover products including agriculture products, makeup, tobacco, textiles, boats, motorcycles, bourbon, and others. The complete list of products can be found here.

In response to the U.S. action, Jean-Claude Juncker, President of the European Commission said the EU had “no choice but to proceed” with a WTO case and retaliatory tariffs. EU Trade Commissioner Cecilia Malmström said that the EU had done everything in its power to avoid this outcome and called today “a bad day for world trade.”

Mexico, which had previously not announced how it would handle American tariffs on steel and aluminum announced a short time ago that it too would impose retaliatory tariffs. These tariffs will cover flat steel, lamps, grapes, blueberries, sausages, cheese, pork bellies and shoulders, apples, and other products. They have not yet released a list of the tariff codes affected.

May 30, 2018

Once again, the trade front is heating up on a variety of issues, with some of them expected to come to a head this week.

Section 232 Investigation on Autos: The Commerce Department formally released its notice for public comment and a public hearing date for its new 232 investigation into auto and auto part imports, which was announced last week.

All comments, requests to testify at the public hearing, and a summary of testimony must be submitted by June 22.

Rebuttal comments are due on July 6.

The 232 public hearings will take place on July 19 and 20 at the Department of Commerce.

Steel and Aluminum Tariffs: The exemption for steel and aluminum tariffs, currently enjoyed by some of the United States’ closest trading partners, expires in two days (June 1), and there is little sign that there will be any further exemptions. EU Trade Commissioner Cecilia Malmström said that she expects the U.S. to issue either a tariff-rate quota or a hard quota against EU steel and aluminum. If this occurs as expected, the EU will retaliate with 25 percent tariffs on approximately $3.34 billion in goods. The EU tariffs will go into effect on June 20 with a possible second round on $4.22 billion of goods set for March 23, 2021. These tariffs will cover products including agriculture products, tobacco, textiles, steel, and others. The complete list of tariff codes affected can be found here.

Section 301 Tariffs: After suggestions from Treasury Secretary Mnuchin that the trade war with China, which included tariffs on $50 billion in Chinese products had been “put on hold,” the White House announced the exact opposite. In a statement, the White House said that it would announce the final list of products covered by the tariffs on June 15 and would impose them “soon after.”

Like many U.S. trade leaders, the Chinese government issued a statement yesterday after the U.S. announcement saying they were “surprised” by the decision. The Chinese government also stated that it violated the agreement reached by both governments only weeks ago. The decision to go forward with the tariffs also puts in jeopardy planned Chinese purchases of agriculture and energy products, negotiated as part of the US-China agreement. Commerce Secretary Wilbur Ross is scheduled to be in China on Saturday to finalize that agreement. It seems unlikely that such a purchase will continue on unchanged if China views the U.S. as going back on a previously negotiated agreement.

May 23, 2018

Tonight, President Trump announced that he had instructed Secretary of Commerce Wilbur Ross to “consider” beginning a Section 232 investigation into the import of automobiles, trucks, and automotive parts and their impact on national security. The Commerce Department soon followed with an announcement stating that it would, indeed, undertake such an investigation.

These announcements follows a cryptic tweet this morning about “good news” that was coming for “American Autoworkers.”

Like many trade actions with the Trump Administration, there are many questions, few answers, and considerable uncertainty. The Commerce statement says that it will focus on “automobiles, including SUVs, vans and light trucks, and automotive parts.” Further, the investigation will explore whether the “decline of domestic automobile and automotive parts production threatens to weaken the internal economy of the United States, including by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes, and other cutting-edge technologies.”

The Commerce Department states that a Federal Register announcement with a hearing date and opportunity to comment will come in the near future.

Launching a 232 investigation is the start of a lengthy process and could follow the path of the 232 investigation into steel and aluminum. That investigation took ten months before the findings were announced, and there are still outstanding questions about exemptions, for both countries and products – the current exemption for several countries expires next week on June 1. The U.S. and the EU continue to discuss a continued exemption, though signs point to those discussions going poorly. Interestingly, President Trump has criticized the EU for putting its own tariffs on imported automobiles.

This investigation also comes in the midst of other ongoing trade issues. NAFTA renegotiation is mired in quicksand, with many chapters and ideas – including an auto rules of origin provision – remaining unresolved; a May 17 deadline for conclusion of negotiations came and went with no final deal. At this point, there seems to be only a slight chance of a comprehensive renegotiated package receiving a vote in Congress in 2018. Additionally, there are still significant trade issues with China that need to be worked out, although the section 301 tariffs have been put on hold for the time being.

This remains a fluid situation, and we will keep you updated as we learn more.

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.

The complete list of products (in Chinese) can be found here, and CNBC was helpful enough to translate the list here.

April 3, 2018

The Office of the United States Trade Representative released its preliminary list of Chinese products that will be subject to higher tariffs late this afternoon. This list was crafted in response to the findings of the Trump Administration’s Section 301 investigation.
The list of products can be found here.
The list includes a wide variety of products, which spans the gamut from machinery to parts to firearms to consumer products like DVD players.


In addition to listing the products, USTR also lays out the timing for a decision on a final list of products that would be subject to increased tariffs:
  • 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

As USTR Lighthizer indicated in his testimony before the Senate Finance Committee this morning, President Trump officially excluded five countries and the European Union from the steel and aluminum tariffs that go into effect on tomorrow (March 23).
The following countries have been granted an exclusion but only until May 1, at which time the Administration will make a final determination on whether the tariffs will be permanently suspended based on the outcome of their ongoing discussions.
The countries exempted are:
  • Argentina
  • Australia
  • Brazil
  • Canada 
  • Mexico
  • 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
  • Wine
  • 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:

“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?