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China Raises Tariffs on 128 U.S. Imports in Retaliation for U.S. Section 232 Steel and Aluminum Tariffs
Tuesday, April 3, 2018

The Chinese government has announced that it is raising tariff duties on 128 products imported from the United States into China in retaliation for the Trump Administration’s Section 232 tariffs on steel and aluminum imports into the United States. The new Chinese tariffs went into effect on April 2.

The 128 targeted products fall into the following seven categories, with tariff rate increases of 15 percent and 25 percent as noted:

  1. Fresh fruit, dried fruit, and nut products (78 items, 15 percent)
  2. Wine (5 items, 15 percent)
  3. Modified ethanol (1 item, 15 percent)
  4. Ginseng (3 items, 15 percent)
  5. Seamless steel tubes (33 items, 15 percent)
  6. Pork meat and products (7 items, 25 percent)
  7. Aluminum Waste/Scrap (1 item, 25 percent)[i]

The full list of affected U.S. exports to China is available here, with an unofficial English translation prepared by Covington available here. Companies involved in importing or exporting products within the categories above into China should carefully review the full list to determine the impact on their interests. The official announcement also provides formulas showing how the tariffs are to be applied, and states that existing policies on bonded imports and duty reductions will not be affected.

The final Chinese tariff list is very similar to a draft list that was circulated by the Chinese government on March 23 for public comment, with some modifications to specific items. An initial statement accompanying the March 23 draft list estimated the value of affected U.S. imports at approximately US$3 billion.

The March 23 statement also asserted the Chinese government’s position that the U.S. tariffs constitute safeguard measures, and that it would respond in accordance with the WTO Agreement on Safeguards (“SGA”). It specifically stated that China would seek to reach an agreement on trade compensation with the United States, consistent with the SGA. According to comments from a Ministry of Commerce spokesperson, China invited the United States to engage in consultations on March 26, but the U.S. government did not respond. Suggesting it was unlikely that the two sides would reach a consensus, the Chinese government submitted its proposed list of suspended concessions and obligations (i.e., tariffs) to the WTO on March 29.

More Trade Actions to Come

Although they are ostensibly aimed at retaliating against the U.S. Section 232 steel and aluminum tariffs, the newly announced Chinese tariffs also follow news of other U.S. economic policies targeting China. The most significant development to watch will be the Trump Administration’s plans to impose trade and investment sanctions against China as a result of the U.S. Trade Representative’s (“USTR”) Section 301 investigation into Chinese intellectual property and technology transfer policies. That investigation, the results of which were announced on March 22, found at least US$50 billion per year in harm caused to the U.S. economy, and is expected to lead to tariffs against Chinese imports of corresponding value, as well as potential measures targeting Chinese investment. As with its response to the Section 232 tariffs, China’s response to U.S. Section 301 actions will likely be proportional to the size and impact of the U.S. measures.

The Trump Administration is expected to release a list of proposed Section 301 tariffs imminently, followed by a 30-day public comment period. With respect to investment-related measures, President Trump has directed the Secretary of the Treasury to propose within 60 days, in consultation with other agencies, executive action “to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.” While the shape and form of the investment-related measures is currently unclear, they are expected to include restrictions on Chinese investment involving the acquisition or transfer of sensitive technologies. We understand that the U.S. and Chinese governments are currently engaged in high-level negotiations to discuss issues of concern, including ways to reduce the trade deficit and to address issues of reciprocity in China’s treatment of foreign businesses.

Tina Zhang and Alex Wang of Covington & Burling LLP assisted with the research and preparation of this article.

[i] Note that these category descriptions are drawn from the draft version of the list circulated by the Ministry of Commerce on March 23 for public comment, as they are not explicitly included in the final version.

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