Welcome to Weise Wednesday! Twice a month we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Q. Do you think recent developments in the trade arena mean the so-called trade war is back on?

A. In my last blog, it appeared that the prospects of a trade war, particularly with China, had diminished in light of a tentative agreement reached in Washington last month between U.S and China leaders that suspended the proposed tariffs on Chinese products. How quickly things change.

 

Section 301 tariffs on China

Although talks between the two countries are continuing with a senior U.S. delegation led by Secretary of Commerce Ross in China this week, the U.S. recently announced its intention to reinstate the proposed tariff increases unless China resolved the intellectual property complaints lodged by the U.S. China promptly announced its intention to impose retaliatory tariffs on a wide range of U.S. exports to China.

The final U.S. list of covered imports will be announced by June 15, 2018. Unless an agreement is reached with China on the fundamental trade dispute, the additional tariffs are expected to become effective 60 days after the final product list is published. 

Again, unless a fundamental agreement is reached between the two parties, the U.S. also intends to implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology. The list of restrictions and controls will be announced by June 30, 2018.

Clearly, these actions raise the threat of a trade war between the U.S. and China. But the good news is that both parties are actively engaged in negotiations to resolve the dispute. Hopefully, an agreement can be reached between the parties before the U.S. tariffs go into effect.

 

Section 232 steel and aluminum tariffs

As discussed in my last blog, the exemptions for steel and aluminum products from Canada, Mexico, and the European Union (EU) were scheduled to expire on May 31, 2018. The U.S. had engaged in bilateral discussions with all three countries in an attempt to reach a mutual agreement to restrict the volume of exports of steel and aluminum products to the U.S. 

The big news here is that those discussions were unsuccessful. The U.S. announced that, effective June 1, the 25% additional tariff on designated steel products and 10% additional tariff on designated aluminum products would go into effect for Canada, Mexico, and the EU. 

All three parties immediately announced their intention to retaliate on a wide range of U.S. products.

The EU submitted two lists of retaliatory tariffs against the U.S. to the World Trade Organization (WTO). The first list includes hundreds of U.S. goods upon which the EU intends to impose an additional 25% tariff beginning June 20. The second list enumerates U.S. goods that would be subject to additional duties of up to 50%.  These additional duties would become effective on the earlier of March 23, 2021, or the date that the WTO determines that the U.S. tariffs are in violation of WTO rules. The tariffs on both lists would remain in effect as long as the U.S. tariffs against EU products remain in effect.

Canada announced its intention to impose retaliatory tariffs of 10% or 25% on a broad range of U.S. exports, effective July 1. A public comments period on the proposed measures expires on June 15.

Mexico also announced its intention to retaliate against the U.S. actions by imposing additional tariffs on a number of products imported from the U.S. This week Mexico published a list of diverse U.S. products that would be subject to additional tariffs of up to 25%, effective immediately.

 

NAFTA renegotiation

It is unclear what impact these actions will have on the continuing negotiations of NAFTA. But based on a number of reports, the parties do not appear to be close to reaching an agreement, and these developments will not help.

 

Conclusion

These collective actions reflect the early stages of a trade war that is deeply troubling to global traders. At this point, it is impossible to predict where all this will lead.  But clearly, the cost of moving a wide range of goods between these countries will increase dramatically. These are indeed challenging and uncertain times. Hopefully, these issues can be resolved between the parties in the coming weeks and months. Now more than ever, it is critically important to stay engaged and stay informed.