Tariff Wars Escalate: USTR Announces Tariff Increases on a Wide Range of Chinese Products and China Responds with Tariffs on U.S. Products Including Agriculture, Whiskey and Autos

Following President Trump’s direction in connection with the Section 301 investigation into China’s acts, policies and practices related to intellectual property (discussed here), on June 15, 2018, the Office of U.S. Trade Representative (USTR) announced a 25% tariff increase on Chinese products valued at approximately $34 billion in 2018 trade values, with more tariff increases to come. Below, we describe USTR’s action and China’s response.

USTR announced that a first set (List 1) of 818 tariff categories, covering imports valued at approximately $34 billion. Additional duties of 25% on products imported under these tariff lines are set to go into effect on July 6, 2018. These tariff categories comprise of a subset of the 1,333 proposed categories USTR published on April 6, 2018. The covered products include (but are not limited to) nuclear reactors, aircraft and parts, boilers, certain machinery equipment and related parts, electrical machinery, television cameras, certain transportation equipment (including for railways, vessel, and vehicles), and optical instruments.

A second set (List 2) contains 284 tariff categories covering imports valued at approximately $16 billion. According to USTR, these tariff categories were identified as “benefiting from Chinese industrial policies, including the ‘Made in China 2025’ industrial policy.” These categories include chemical products, plastics and resins, electrical machinery and equipment, railway and locomotive equipment, and some integrated circuits. USTR will finalize the list following a public notice and comment process, including a hearing. USTR has requested comments on:

• Whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of China’s acts, policies, and practices; and
• Whether maintaining or imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small- or medium-sized businesses and consumers.

The relevant dates for the proceeding are as follows.

• June 29: Filing requests to appear at the hearing and a summary of the expected testimony
• July 23: Written comments
• July 24: Public hearing
• July 31: Post-hearing comments

Accordingly, List 2 is subject to change, meaning that some tariff categories may be removed and new ones added after the public comment process.

In addition, USTR announced that it will establish a process for U.S. stakeholders to request that particular products be excluded from the 25% tariff. USTR explained that it determined to take this action in light of concerns raised by parties that specific products were “not strategically important or related to the ‘Made in China 2025’ program” or only available in China, and that the imposition of additional duties would “cause severe economic harm to a U.S. interest”. Details about the procedures for such requests are forthcoming.

China has responded in kind. China announced tariffs on $34 billion of U.S. goods, including agricultural products, whiskey, and autos, which will enter into effect on July 6, 2018. In addition, China also announced for public comment a proposed list of products intended for tariff increases. These products are also valued at $16 billion worth of trade and include chemicals, medical equipment, and energy products.

Following China’s announcement, President Trump directed USTR to identify products covering $200 billion worth of Chinese goods for 10% duty increases. President Trump explained that the tariffs will go into effect “after the legal process is complete” and “if China refuses to change its practices” or “insists on going forward with the new tariffs it has recently announced.”