On June 15, 2018, the Office of the U.S. Trade Representative (“USTR”) announced a list of products imported from China that will be subject to additional tariffs, either imminently or subject to further public comment. This action results from USTR’s investigation into Chinese trade and industrial policies that harm U.S. intellectual property, which was initiated in August 2017 under Section 301 of the Trade Act of 1974. USTR’s announcement followed President Trump’s May 29, 2018 decision to release the product list for new Chinese tariffs by June 15. Friday’s action signals that the bilateral trade negotiations between the two countries, which have been ongoing since early May, were unable to quell the threats that the two sides have made.
A list of Chinese products subject to the Section 301 tariffs was originally issued in April 2018. (See our April 4 Legal Update, “U.S. Announces Section 301 Tariffs and China Immediately Reciprocates.”) The revised list was released on June 15 after a notice and comment period and consists of two sets of U.S. tariff lines (1,102 tariff lines in total) valued at approximately $50 billion. The first set contains 818 tariff lines for which the United States will impose an additional duty of 25 percent on imports from China, effective July 6, 2018.1 These tariff lines cover approximately $34 billion worth of imports from China and are consistent with the proposed product list released for public comment back in April.
The second set contains 284 new tariff lines identified as benefiting from Chinese industrial policies, including the “Made in China 2025” program, subsequent to April.2 These 284 lines, which cover approximately $16 billion worth of imports from China, will undergo further review in a public process, including a public hearing. Thereafter, USTR will issue a final determination as to whether some or all would be subject to the additional duties.
Within hours of USTR’s June 15 tariff announcement, China harshly condemned the U.S. action and announced its own list of U.S. products subject to tariffs. Similar to the U.S. approach, China announced a product list consisting of 545 tariff lines for which U.S.-origin products will be subject to an additional duty of 25 percent, also effective July 6, 2018.3 The U.S. products affected include agricultural products (such as soybeans), cars and aquatic products, valued at approximately $34 billion. In April, China also proposed that certain U.S. products would be subject to new duties in response to U.S. action. (See our April 4 Legal Update, “U.S. Announces Section 301 Tariffs and China Immediately Reciprocates.”)
When compared with the April list, China’s latest list does not include airplanes but nonetheless is significantly expanded—from 106 tariff lines to 545 tariff lines. The 545 lines include a variety of animal products (meat, fish and dairy products, in particular), vegetable and fruit products and nuts, as well as aquatic products, which were added after April. And, just as the United States did, China has “proposed” to impose an additional duty of 25 percent on a second list of U.S.-origin products across 114 tariff lines. The second list consists of chemicals, medical equipment and energy products, valued at approximately $16 billion.4 As compared with the April list, China added a slew of minerals to the list of products potentially subject to additional duties. With respect to the second list, “the final measure and the effective date will be publicly announced separately.”5
Finally, China separately indicated that all of the economic and trade outcomes the two parties had reached in previous negotiations over the last several months will become invalid. Thus, for example, China is presumably withdrawing its commitment to strengthen cooperation between the two countries in the agriculture and energy sectors, including reportedly an offer to purchase $70 billion worth of U.S. agricultural and energy products and other goods. In addition, it is unclear whether China will also withdraw the commitments it has made in the U.S.-China Economic Cooperation 100-Day Plan (the “100-Day Plan”) following a presidential summit at Mar-a-Lago back in April 2017. During the negotiations in recent months, U.S. officials pursued Chinese actions on several issues included in the 100-Day Plan, such as those related to poultry, beef and biotechnology. Based on Friday’s U.S. tariff announcement and China’s hard-line response, the U.S. demands on these issues are unlikely to be met in the near future. China also promised to meet tariff increases with tariff increases.
1 The list of the first set of tariff lines is here: https://ustr.gov/sites/default/files/enforcement/301Investigations/List 1.pdf.
2 The list of the second set of tariff lines is here: https://ustr.gov/sites/default/files/enforcement/301Investigations/List 2.pdf.
3 The first Chinese list is here: http://images.mofcom.gov.cn/www/201806/20180616015345014.pdf.
4 The second Chinese list is here: http://images.mofcom.gov.cn/www/201806/20180616015405568.pdf.