Scrap Tariffs, ‘Work With Allies’ on ‘Plurilateral’ Trade Pact, IBM Urges Trump

The Trump administration should pursue a “plurilateral agreement among the world’s largest economies” to curb China’s allegedly unfair trade practices, commented IBM in docket USTR-2018-0026 in opposition to the third tranche of Section 301 tariffs on Chinese imports. IBM thinks that a global agreement with China’s “largest trade and investment partners” could help “establish broad new norms,” it said.

To start with, the EU and Japan “would be logical, willing partners” in working with the U.S. “to bring about needed updates to China’s terms of access to global markets,” it said. “These nations share many of the concerns about Chinese policies and practices” that the Office of the U.S. Trade Representative described in its Section 301 investigative report, it said.

The first two rounds of “unilateral tariffs” the U.S. imposed on Chinese imports are “counterproductive,” and IBM urges the administration “not to proceed” with the third, it said. “Tariffs are taxes, first and foremost on American consumers,” and when applied unilaterally “mainly benefit the global competitors of U.S. companies,” it said. Tariffs also risk “ever-increasing retaliatory measures,” and will hamper any U.S. opportunity “to work cooperatively with allies to further open the Chinese economy,” which is, “after all, the principal goal of this exercise,” IBM said.

Though Nvidia doesn't make graphics processing units (GPUs) in China, some of its “platforms and cards” are assembled there, and “third-party resellers and partners” import them to the U.S. under Harmonized Tariff Schedule subheadings 8471.50.01 and 8473.30.11, the tech company commented. Those goods are targeted for tariffs of up to 25 percent in the third tranche, “even though the vast majority of their value derives from engineering work in the United States,” Nvidia said. It’s “working diligently” with those partners “to mitigate possible negative impacts on consumers, academics, and researchers,” it said. “However, that work will not be completed before the anticipated time” that the third tranche “comes into effect,” so it’s asking that those products be exempted.

Without a “limited exemption for GPU-powered platforms,” the tariffs will have “a disproportionate impact on U.S. interests, burdening products used by students, researchers, engineers, scientists, and small businesses,” Nvidia said. Millions of American consumers buy Nvidia GPU cards for their PCs, and thousands of small businesses use them to market “custom made-to-order PCs and workstations,” it said. “The GPU is a key differentiator in such systems, and a large driver of the cost.” Nvidia sees “no indicators” suggesting that implementing tariffs on “this narrow class of products would meaningfully affect any of China's acts, policies, and practices that the USTR wishes to influence,” it said.

“Real evidence is starting to mount” that the first two rounds of tariffs are hurting the U.S. economy, the American Association of Exporters and Importers (AAEI) commented. “We have seen a cascading effect resulting from the imposition of and pending tariffs on Chinese products as these costs ripple through the supply chain.” Publicly traded companies are finding the tariffs have “negatively impacted” their stock prices, while many others “find themselves in the odd situation of having to pay duties on their own products simply because they are manufactured in China,” it said.

Other “unintended consequences” of the tariffs, AAEI said, are: (1) Companies are forced to incur higher costs by air-shipping goods from China to beat the tariffs before they take effect; (2) Small and medium-sized enterprises can’t “absorb” the costs of the higher levies, putting their “solvency” at risk; (3) with the higher tariffs, CBP is requiring importers to increase their “customs bonds,” causing a “financial hardship” for many; and (4) tariffs risk exacerbating “fraudulent transshipping,” which is “already a significant customs enforcement problem.”

Sonos also asked the USTR not to impose the new tariffs. The products Sonos imports from China are contract-manufactured exclusively for the company, “based on our designs and to our quality and performance standards,” using R&D that “all occurs” in the U.S., the supplier said. Sonos also sources supply chain management, shipping, logistics and other services from Chinese companies, and has done so without difficulty, it said.

Imposing tariffs on the networking products imported to the U.S. from China under the same HTS subheading 8517.62.00 as Sonos smart speakers “would have a detrimental impact on U.S. interests,” commented Cisco, Dell, Hewlett Packard Enterprise and Juniper. “The duties would effectively create a tax on public sector and business entities,” the companies said. “Given the enormous volume of potentially impacted trade,” the tariffs would affect more than $23 billion in total imports and “create potential duty liability” of up to $5.7 billion a year for U.S. consumers, they said. “Prices for networking products and accessories would almost certainly increase.”

The cellphone chargers, batteries and accessories that Xentris Wireless sources from China under subheadings 8504.40.85, 8504.40.95, 8506.80.00 and 8544.42.20 account for 80 percent of the company’s profits and revenue, the supplier commented. Virtually none of the goods that Xentris imports from China “can be sourced from anywhere other than China,” the company said. Though a “handful” of alternative suppliers exists in Vietnam, Taiwan, the Philippines and South Korea, “they either lack the product quality or technology” Xentris needs, or the “sufficient breadth or variety of products to cover the many different variations of products that we carry,” it said.

Meanwhile, 85 trade associations from various industries are banding together to form Americans for Free Trade in a “major campaign against tariffs,” the group said in a news release. "Beginning with the September Congressional recess and continuing in the Fall, we will be holding events that bring together those Americans whose livelihoods have been impacted by tariffs for public events that highlight the need to de-escalate the trade war," the ad hoc coalition said in a letter to House leadership.