China Responds to US Tariff Increase with New Tariffs

On July 10, 2018, the Office of the US Trade Representative (“USTR”) announced a list of additional products imported from China that potentially could be subject to a 10 percent tariff after a notice and comment period. (See our July 11, 2018 Legal Update, “US Announces Additional Section 301 Tariffs After China’s Retaliatory Moves on US Products”). On August 1, USTR Robert Lighthizer issued a statement that his agency, under President Trump’s direction, is considering increasing the level of the proposed tariff from 10 percent to 25 percent.  The comment period on this action has been extended from August 30 to September 6, accordingly.¹

On August 3, in response to this latest US action, China announced four lists of US-origin products imported into China that would be subject to varying levels of new tariffs. The new Chinese tariffs would affect a wide range of US products spread across nearly all chapters of the harmonized tariff schedule (5,207 tariff lines) and valued at approximately $60 billion. Examples of these affected products include chemicals, agricultural products, small- and medium-size airplanes and auto parts.²

Unlike the US action proposing a single tariff rate, China opted to adopt four different levels of increased tariffs—that is, 25 percent, 20 percent, 10 percent and 5 percent. Specifically, the first Chinese list consists of 2,493 tariff lines for which US-origin products will be subject to an additional duty of 25 percent.³ The second Chinese list consists of 1,078 tariff lines for which US-origin products will be subject to an additional duty of 20 percent.⁴ The third Chinese list consists of 974 tariff lines for which US-origin products will be subject to an additional duty of 10 percent.⁵ The fourth Chinese list consists of 662 tariff lines for which US-origin products will be subject to an additional duty of 5 percent.⁶ The official notice, in Chinese, also states that “reductions and exemptions will not apply to tariffs imposed this time.”⁷ The effective date for the new tariffs will be announced in a separate notice, depending on US actions.⁸

In announcing the new tariffs, China again criticized the US action as “departing from common understandings reached during multiple negotiations, causing the Sino-US trade dispute to escalate, seriously violating relevant WTO rules, and infringing China and Chinese people’s interests.”⁹ It further explained that its countermeasure adopting different tariff levels is “reasonable” and “constrained,”¹⁰ after taking into account the impact on companies and the global supply chain.¹¹ It is doubtful, though, that the Trump administration will view China’s retaliation as such.   

¹ https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/statement-us-trade-representative.

² http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/t20180803_2980950.html.

³ Chinese August 3 Product List 1, 
http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/P020180803711628159425.pdf.

⁴ Chinese August 3 Product List 2, http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/P020180803711628507212.pdf.

⁵ Chinese August 3 Product List 3, http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/P020180803711628844240.pdf.

⁶ Chinese August 3 Product List 4, http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/P020180803711629144210.pdf.

⁷ http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201808/t20180803_2980950.html.

⁸ http://www.mofcom.gov.cn/article/ae/ag/201808/20180802772614.shtml.

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