On February 24, 2019, President Trump announced that the United States will delay an increase in Section 301 tariff rate on approximately $200 billion worth of Chinese imports (i.e., products on the US List 3),1 which was originally scheduled to take effect March 2, 2019.2 This announcement represents the second extension for increasing the ad valorem rate from 10% to 25% on the largest group of Chinese imports affected by additional tariffs imposed under Section 301 of the Trade Act of 1974. The Section 301 tariffs on Chinese imports resulted from an investigation by the Office of the US Trade Representative (“USTR”) into Chinese trade and industrial policies related to intellectual property.3 The additional Section 301 tariffs took effect at an ad valorem rate of 25% on two other lists of Chinese imports valued at approximately $50 billion on July 6 and August 23, 2018, respectively.4 On September 24, 2018, the United States began to impose Section 301 tariffs on products on US List 3 at an ad valorem rate of 10%, which at the time was set to increase to 25% on January 1, 2019.5 Later, in December 2018, the deadline for the tariff increase was extended to March 2, 2019, to allow time for bilateral negotiations between the United States and China to resolve their trade dispute.6
Citing “substantial progress” in the US-China trade negotiations, President Trump tweeted on Sunday that the tariff increase related to US List 3 will be delayed to an unspecified date and, “[a]ssuming both sides make additional progress,” a “Summit” may be planned at Mar-a-Largo, Florida, for President Trump and China’s President Xi Jinping to finalize the trade agreement.7 The specific timing of the “Summit” remains unclear. White House National Economic Council Director Larry Kudlow indicated that it may occur in late March. The presidential message specifically references substantial progress on “structural issues including intellectual property protection, technology transfer, agriculture, services, [and] currency.”8 USTR Robert Lighthizer also cited progress on important structural issues as well as on purchases of US exports, while cautioning that “a few very, very big hurdles” remain.9
The two sides are working on several memoranda of understanding on different key subjects, which will be renamed “trade agreements” at the president’s direction.10 At this point, there is no clear message as to the final form of the potential agreement, nor what enforcement mechanism, if any, will be included in that agreement. It is also uncertain whether a final agreement will result in a revocation of recent Section 301 tariffs on Chinese imports, either in full or in part, or simply prevent further tariff escalation. Interested parties should continue to monitor developments in the US-China trade negotiations.
1 Donald J. Trump @realDonald Trump, Tweets available at https://twitter.com/realDonaldTrump/status/1099800961089003522 and https://twitter.com/realDonaldTrump/status/1099803719435239426.
2 Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 65,198 (Dec. 19, 2018) (“the December 2018 Extension Notice”).
3 Mayer Brown Legal Update, US Imposes 25 Percent Tariff on Second List of Chinese Imports, available at https://www.mayerbrown.com/US-Imposes-25-Percent-Tariff-on-Second-List-of-Chinese-Imports-08-28-2018.
5 Mayer Brown Legal Update, New Section 301 Tariffs: US Targets $200 Billion Worth of Chinese Imports and China Responds, available at https://www.mayerbrown.com/new-section-301-tariffs-us-targets-200-billion-worth-of-chinese-imports-and-china-responds-09-19-2018/.
9 CNBC, US, China extend trade talks as Trump and Xi express optimism available at https://www.cnbc.com/2019/02/22/xi-calls-on-us-china-to-redouble-trade-deal-efforts-in-letter-to-trump.html.