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U.S. China Trade Deal – Phase One

U.S. China Trade Deal – Phase One

Phase One Trade Seal Signed

On December 12, 2019, President Trump signed off on a “Phase One” U.S.-China Trade Deal.  This came just 3 days before additional tariffs were to be imposed on Section 301 List 4B imports from China, which are already incurring a 15% additional duty rate.  As agreed upon in October of this year, the planned tariffs for List 4B have been canceled.  The deal promises that China will buy more agricultural products from the United States.  On December 5, 2019, it was mentioned that China agreed to purchase up to $50 billion dollars worth of U.S. farm goods within two years if the U.S. pulled back the tariffs, and according to The South China Morning Post, China had already moved forward with its gesture.  Some Chinese companies had already “imported certain quantities of goods from the United States.”  China has also agreed to buy energy, other manufactured goods, along with more U.S. wheat, corn and rice, as well.  According to Reuters, “The 86-page agreement is due to be signed the first week of January in Washington by principal negotiators.”

China Trade Deal

Tariff Changes

According to The Wall Street Journal, the U.S. has offered to cut existing tariffs in half, which make up around $360 billion of imports from China.  Currently, these tariffs are imposed as an additional tariff ranging from 15% to 25%.   However, President Trump tweeted just hours later that the Section 301 tariffs would remain in place at 25% with “7 1/2% put on much of the remainder.”  In other words, Section 301 List 4A imports from China with a current 15% ad valorem duty rate that went into effect on September 1, 2019 will only incur a 7.5% ad valorem rate.  However, the rest of the tariffs, List 1, 2 and 3 at 25% will remain in place, unlike what news mediums were reporting earlier.  The United States Trade Representative states, “The United States first imposed tariffs on imports from China based on the findings of the Section 301 investigation on China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.  The United States will be maintaining 25 percent tariffs on approximately $250 billion of Chinese imports, along with 7.5 percent tariffs on approximately $120 billion of Chinese imports.”The article goes on to state, “Should Beijing fail to make the purchases it has agreed to, original tariff rates would be reimposed.”  The agreement has yet to be “formally announced,” but it is rumored that the tariff cut announcements are planned for December 13, 2019.

china phase one trade deal

Phase Two

This agreement leads to conversations in the direction of a “Phase Two” Trade Deal, which will dive deep into intellectual property rights, currency manipulation and the opening of the Chinese financial services market, among other issues.  President Trump says these negotiations will begin immediately and they will not wait until after the 2020 election.


Has Section 301 affected your company?

Our Global Trade Experts and Licensed Customs brokers are here to help.

If the Section 301 tariffs are affecting your company, watch this webinar recording to learn more.  Scarbrough’s President and COO, Adam Hill, along with Patrick Caulfield, an attorney at GDLSK, an international trade and customs law firm, talk about legal opportunities to recover or avoid paying duty to CBP.  This is an interactive webinar set up as a question/answer forum.

FREE Consultation

Scarbrough Consulting, Inc. is offering a free 30-minute consultation to any company that may be affected by the Section 301 announcements.  Please send an email to consulting@scarbrough-intl.com or fill out the form below.

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Resources

To read more about Section 301, visit USTR.gov

To review Section 301, visit this helpful Resource Page

Download each Section 301 List below:

View List 4a Effective Sept 1

View List 4b Effective Dec 15


Section 301 List 1
Section 301 List 2 Section 301 List 3

 

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