These days, there’s never a dull moment in Washington when it comes to trade policy, specifically tariffs. The Trump Administration has made trade policies, particularly with China, a top priority and the use of tariffs has been a main tool for President Trump. For this update, we will look at the latest on the steel and aluminum tariffs (Section 232) and the tariffs on Chinese products (Section 301).
Back in March of 2018, President Trump used Section 232 of the Trade Expansion Act of 1962 to apply 25% and 10% tariffs, respectively, on certain steel and aluminum imports. Section 232 grants authority to the President to impose restrictions on certain imports based on an affirmative determination by the U.S. Department of Commerce that the targeted products are being imported into the United States “in such quantities or under such circumstances as to threaten to impair the national security.”
The Administration temporarily granted Section 232 tariff exemptions for several countries pending negotiations on new trade agreements. Permanent tariff exemptions, in exchange for import quotas, were eventually granted to Brazil and South Korea for steel, and to Argentina for both steel and aluminum. Australia received a permanent exemption from both tariffs with no quotas. In June 2018, the Administration removed the temporary tariff exemptions for Canada, Mexico, and the European Union.
In August 2017, the United States Trade Representative (USTR) initiated an investigation into the Chinese government’s actions on trade. During the investigation, the USTR determined that China’s policies and practices are unreasonable or discriminatory and burden or restrict U.S. commerce, and are thus actionable under Section 301 of the Trade Act of 1974.
Last year, USTR used Section 301 to impose an additional 25% tariff on Chinese imports with an annual trade value of approximately $250 billion. The additional tariffs were imposed in three lists. List 1 covered 818 products, with an approximate annual trade value of $34 billion. List 2 covered 279 products, with an approximate annual trade value of $16 billion. List 3 covered 5,733 products, with an approximate annual trade value of $200 billion and included some LBM products.
On May 17, the U.S. announced an agreement with Canada and Mexico to remove the Section 232 tariffs for steel and aluminum imports from those countries and for the removal of all retaliatory tariffs imposed on American goods by those countries. According to the Administration, the agreement provides for aggressive monitoring and a mechanism to prevent surges in imports of steel and aluminum. If surges in imports of specific steel and aluminum products occur, the United States may re-apply Section 232 tariffs on those products. Any retaliation by Canada and Mexico would then be limited to steel and aluminum products.
On May 10, the USTR raised Section 301 tariffs on List 3 goods from 10% to 25% after trade negotiations between the U.S. and China stalled. On May 17, USTR proposed a 25% tariff on an additional $300 billion of imports known as List 4. President Trump originally suspended the proposed List 4 tariffs in June after the U.S and China had productive trade talks at the G20 conference. However, he eventually reinstated List 4 tariffs at a 10% rate and split List 4 into two separate lists, one effective September 1, 2019 and the other effective December 15, 2019. Popular consumer products included on List 4 received the Dec. 15 effective date in order to avoid disrupting the holiday shopping season.
On Aug. 23, President Trump announced that his Administration planned to increase the rates for all current and proposed Chinese tariffs. Specifically, the tariff rate for $250 billion worth of Chinese imports on Lists 1-3 would be increased from 25% to 30%, effective October 1, 2019. In addition, the recently proposed List 4 tariffs on $300 billion worth of Chinese imports, scheduled to go into effect on Sept.1and Dec.15 of this year, would be increased from 10% to 15%.
This action from the Trump Administration came in response to the Chinese government’s announcement of retaliatory tariffs on $75 billion worth of U.S. imports starting Sept. 1 and Dec. 15. These new retaliatory tariffs from China will hit U.S goods including automobiles, crude oil and a variety of agricultural commodities.
On Sept. 11, President Trump announced he was delaying the tariff rate increase for Lists 1-3 from Oct. 1 to Oct. 15 in a show of good faith to China during their government’s 70th anniversary.
On Sept. 20, NLBMDA formally submitted comments to USTR opposing the 5% tariff rate increase for List 3 imports. We will continue to be engaged on this issue to ensure that the LBM industry is not adversely affected by these tariffs and other trade policies.
Kevin McKenney is director of government affairs for NLBMDA in Washington, D.C. For more information, visit www.dealer.org.