China Tariffs Draw Objections From Industry, Retaliation From China

China will impose new tariffs on oak wood veneer, non-electrical machines, makeup, copper and natural gas, which are all among the top-volume items in 3,571 U.S. imports that will be subject to 10 percent retaliatory tariffs at 12:01 a.m. on Sept. 24. Another 1,636 tariff lines will be subject to an additional 5 percent tariff, with bleached wood pulp, cow hides, optical media and needles and catheters among the highest-volume goods. Together, the two lists accounted for about $60 billion in imports last year. China's tariffs come in response a newly released list of goods from China to face Section 301 tariffs in the U.S. starting Sept. 24 (see 1809170051).

China said on Sept. 18 it deeply regrets having to escalate by raising tariffs of its own, and noted that the Trump administration has heard overwhelming opposition to its tariff increase. It also said the escalation "brings new uncertainty to the consultations between the two sides." President Donald Trump, speaking to reporters at the White House, said, "We are always open to talking," but also said if there's retaliation from China, the administration will increase tariffs on the remaining $267 billion in Chinese imports that have not yet been targeted. "We may make a deal at some point," he said.

The U.S. will levy a 10 percent tariff on nearly $200 billion in goods until the end of the year, and then increase the rate to 25 percent. The Office of the U.S. Trade Representative did remove or partially remove 297 tariff lines in response to public comments, with plastic gloves (3926.20.30), child safety seats (9401.80.80.21) and fluorinated, brominated or iodinated derivatives of acyclic hydrocarbons (2903.39.20) some of the highest-volume lines gone from the list.

The USTR removed some popular consumer goods from a heading that includes switches and routers, which are not exempted. Those include Bluetooth headphones and smartwatches. Those consumer goods will be given a new Harmonized Tariff Schedule subheading, a USTR spokeswoman said. "8517.62.00.90 is a new 10-digit breakout for 8517.62.00," she said. "The changes will be reflected in the HTSUS contemporaneously with new Section 301 tariff action."

The list "includes tariff subheadings covering virtually all of the United States’ imports of Chinese seafood," the Southern Shrimp Alliance, which supports the tariffs, said in a news release. "The final list encompasses both aquacultured and wild-caught seafood products, as well as seafood products that are further processed in China. In 2017, the U.S. imported roughly $2.7 billion worth of Chinese seafood of which roughly $1 billion was comprised of aquacultured seafood."

Many other trade groups, including the U.S. Chamber of Commerce, weren't happy with the new tariffs. "Today’s decision makes clear that the administration did not heed the numerous warnings from American consumers and businesses about rising costs and lost jobs on Main Street, in factories, and on farms and ranches across the country," CEO Thomas J. Donohue said in a Sept. 17 statement.

A survey of U.S.-China Business Council members -- conducted months before this latest round of tit-for-tat tariffs -- found companies said U.S.-China relations were their No. 1 problem, far ahead of intellectual property violations, which was 10th on the list. Nearly 30 percent of companies -- all of which do business in China -- said they've had increased scrutiny from Chinese regulators because of these tensions, and 15 percent said tariffs had cut into sales. Erin Ennis, senior vice president at USCBC, said the proportion of companies who chose trade tensions as the No. 1 problem was nearly 40 percentage points higher than those who chose competition with Chinese companies within China as the top challenge.

The American Apparel and Footwear Association said that while it's thankful that some textiles were removed, "this tariff action is cruel to U.S. interests, particularly since companies are only being given one week’s notice and because the tariffs will automatically be increased to 25 percent after the first of the year."

Politicians also talked about the pain from tariffs for companies and consumers. Dave Reichert, House Ways and Means Trade Subcommittee chairman from Washington state who is not running for re-election this year, issued a Sept. 17 statement saying that instead of "punishing China, today’s announcement places the burden on American families, manufacturers, and farmers, who will pay the higher tariffs and bear the brunt of retaliation." Rep. Jackie Walorski, R-Ind., said on Sept. 18, in a statement: "We need to hold China accountable for its unfair trade practices, but I am increasingly concerned about the harmful impact tariffs are having on Hoosier farmers and manufacturers."

Sen. Ron Wyden, D-Ore., ranking member on the Senate Finance Committee, also acknowledged China is an unfair trader, but added: "The Trump Administration seems to have just one play in its playbook: slap tariffs to raise prices on an ever growing list of products used by American consumers and hope China blinks first. I am increasingly concerned that the administration’s tactics have yet to produce any real change in behavior in China, and are only creating chaos for American businesses, workers, and consumers."

House Ways and Means Chairman Kevin Brady, R-Texas, responded to the new tariffs, saying Sept. 17 that "President Trump is clearly ratcheting up the pressure on China to come to the table and begin crafting a new trading relationship that is fairer to American farmers, workers, and businesses. The sooner President Xi and President Trump meet to craft a new trade path forward, the better. ... Any time tariffs are imposed I worry that Americans will be forced to pay extra costs -- in this case on nearly half of U.S. imports from China."

"The Chinese side had indicated a willingness to discuss the issues," said Craig Allen, USCBC president, who traveled to China two years ago and who served as a top Commerce diplomat in China before retiring from the U.S. Foreign Service. He said it's not true that China doesn't know what the U.S. wants in this negotiation, and that they believe about 35 percent of the asks are "very reasonable," and China could do them in the short term. He estimated that another 35 percent would require legislation, but are something they could do. He said the rest might be behind a red line that China won't cross.