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Aug. 23, 2019

Tariff Insider: August 23, 2019

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Editor’s note (Aug. 30): In order to help more of our customers mitigate tariff increases that go into effect on Sept. 1, Flexport Air has rescheduled the arrival of our HKG-ORD flight this weekend to arrive at 23:45 on Aug. 31. To learn more about strategies to reduce or limit increasing supply chain costs, connect with a Flexport representative today.

China Announces Tariffs on $75 billion worth of U.S. Exports; President Trump Tweets Proposed Changes to September and December Tariff Deadlines

The trade war between the United States and China escalated again on Friday when word came from Beijing of retaliatory tariffs — including reinstated levies on automotive parts — on $75 billion worth of U.S. exports.

According to a release from China’s Finance Ministry, U.S. imports will face increase tariffs of 5% or 10% effective September 1. Among the goods impacted by the announcement are automobiles — which could face a 25% tariff effective December 1 — along with agricultural products, including soybeans and coffee, and more than 5,000 other products.

President Trump Responds by Raising Existing and Planned Tariffs

President Trump then took to Twitter to issue updates to current U.S. tariffs on Chinese goods. These increased tariffs — recognized by and pending finalization from the Office of the United States Trade Representative — include:

  • List 1, 2, and 3 tariffs currently at 25% will move to 30% as of October 1
  • List 4a tariffs, currently slated to take effect at 10% on Sept 1 will rise to 15% on the deadline day
  • List 4b tariffs, currently slated to take effect at 10% on Dec 15 will rise to 15% on the deadline day

Our Chief Economist’s POV

Flexport’s Chief Economist Dr. Phil Levy believes that the odds of a U.S.-China deal were already very low and just fell further. “It is unlikely that U.S.-China trade talks scheduled for next month will be anything more than low-level perfunctory discussions if they take place at all. More likely is that China will now wait for the November 2020 election before seriously attempting to resolve the conflict.

Levy adds, “Two key questions are whether President Trump will then continue to hike tariffs (especially on List 4 items) and whether Congress will take any action. The latter is relatively unlikely, though Senate Finance Committee Chairman Charles Grassley (R-IA) has said he intends to, in the context of national security tariffs.”

Please note that much of this information is preliminary. We will be tracking the situation as it evolves. Stay tuned for more details as they emerge.

Hear Flexport Chief Economist Dr. Phil Levy speak at FORWARD 19, Flexport’s upcoming conference on shipping and supply chain management. Levy will be leading a session focused on tariffs, global macroeconomics, and how to navigate the trade wars.

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