What this means for Chinese imports
At the end of 2020, over 2,200 product exclusions from the U.S. “Section 301” tariffs on Chinese imports expired. The exclusions, initially granted by the U.S. Trade Representative’s Office (USTR) of the Trump administration, aimed to provide certain sectors with relief from tariffs on Chinese goods. At the time of expiration, 549 of the 2,200 exclusions were extended for a year.
Although the USTR had been planning on reinstating all 549 product exclusions in 2022, it ultimately only reinstated 352 on the 23rd of March. These exclusions will be effective retroactively from October 12, 2021 to December 31, 2022.
Section 301 Tariffs
In March 2018, the Trump administration determined that Chinese technology transfer and intellectual property policies were detrimental to the U.S. economy and U.S. companies. Consequently, it had also encouraged a “trade war” between the U.S. and China consisting of harsh punitive tariffs covering an estimated total of roughly US$370 billion worth of Chinese imports. The administration imposed the tariffs in four escalating tranches between July 2018 and September 2019, ranging in severity from 7.5% to 25%.
For each of the four tranches, companies could request product-specific exclusions to avoid tariffs that would significantly harm their business. This process was particularly relevant for companies that used products that are only available from China or very difficult to obtain elsewhere. Thousands of companies had asked for waivers and received exclusions to allow them to import products while avoiding levies. The USTR granted over 2,200 exclusions for products such as industrial components and consumer goods like pumps, motors, chemicals, car parts, bicycles, backpacks, and domestic electronics.
The Effect on U.S Businesses and Consumers
With the focus on industrial and consumer goods, exclusions benefited a range of businesses and everyday consumers in the U.S. Therefore, reinstating the tariff exclusions on these products helped encourage a normalized trade flow and improve bilateral trade relations between the U.S. and China.
These factors were particularly important as the two countries, as well as the rest of the world, continued to work toward recovering economically from the global hardships caused primarily by the coronavirus pandemic and other recent world events. As the Biden administration took over in 2020, critics of the trade war from the previous years complained that the Biden administration needed to do more to alleviate the subsequent financial struggles that many businesses in the U.S. experienced.
Public Response and Feedback
As USTR worked to determine which products to exclude, it published a Federal Register notice to invite the public to comment on the 549 exclusions. The notice allowed the public to provide feedback on preferences for which exceptions should be reinstated and for how long. USTR used this information as well as input from other U.S. agencies and advisory committees in determining the final list of 352 products exclusions.
The Household & Commercial Products Association released a statement in support of the exclusions, stating that it has always advocated for “removing barriers to free trade” as a vital part of the success of the American manufacturing industry. The association emphasized that China’s position as a major U.S. trading partner makes it critical to consider how tariffs on certain products can impact the U.S. economy as well as consumer costs and challenges in the supply chain.
By reinstating the limited list of exclusions, some companies can avoid the taxes on goods that they are only able to obtain from China. Amid increasing inflation and the ongoing coronavirus pandemic, the reinstated tariff exemptions can help improve engagement between two of the world’s largest economies.
For more information regarding the product exclusions or to hear how our supply chain solutions can make logistics easier for you, contact an expert team member at ClearFreight today.