Further Escalation of Trade War: Trump Administration Raises Tariffs on Chinese Products

On May 9, 2019, the Office of the United States Trade Representative (USTR) issued a Federal Notice indicating that tariffs on $200 billion worth of Chinese imports would be increased from 10% to 25%. These products are included in the third set of tariff categories (the first two sets are discussed here) announced by USTR in connection with the investigation under Section 301 of the Trade Act of 1974 into China’s acts, policies, and practices related to intellectual property (discussed here). The increase will go into effect on May 10, 2019 at 12:01 am eastern daylight time. Over the weekend, President Trump also threatened a 25% tariff will “shortly” be imposed on the remaining $325 billion worth of imports not currently subject to tariffs. For the prior three sets of Section 301 duties, there were proposed regulations with opportunity for public comment, and it seems likely that USTR would follow the same approach if there will be a fourth set.

These actions follow a setback in the negotiations for a U.S.-China trade deal. Since December 2018, the U.S. has been engaged in negotiations aimed at reforming China’s intellectual property and technology transfer rules, as well as other issues such as cybertheft, agriculture, services, nontariff barriers and currency manipulation. Last week, before a trip to China with USTR Robert Lighthizer, Treasury Secretary Mnuchin stated that the talks were in the “final laps”. However, on Monday, the U.S. officials claimed that China had walked back on some of its commitments. The Chinese delegation, which will include Chinese Vice Premier Liu He, is expected to be in Washington, D.C. today to continue negotiations.

USTR Lighthizer has indicated that at the end of this month, USTR expects to launch a product exclusion process for products on List 3. A separate notice will be published describing the process, procedures for submitting exclusion requests, and an opportunity for interested persons to submit oppositions to a request. Under the product-exclusion procedures for Lists 1 and 2, USTR considered the following factors in evaluating exclusion requests:

• Whether the particular product is available only from China, i.e. whether the product or a comparable product is available from sources in the U.S. or other third countries.
• Whether the imposition of additional duties on the particular product would cause severe economic harm to the requestor or other U.S. interests.
• Whether the particular product is strategically important or related to “Made in China 2025” or other Chinese industrial programs.

The products at issue on List 3 include food products, fabrics, paper products, yarn, metals, electronics, furniture, wood products, among a variety of other products. The list of products is available here.

As of May 3, over 1,400 product exclusion requests (out of almost 11,000 submitted) had been granted for products included in List 1. None have so far been granted for List 2.