Feb. 27, 2019

Tariff Insider: February 27, 2019


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The Big News: Trade Deal Deadline Postponed

In late 2018, a 90-day truce was established, halting any tariff increases until March 1st, 2019, when either China and the U.S. would need to have negotiated a trade deal, or tariffs on section 301 goods would increase from 10% to 25%. As the March 1 deadline loomed closer and both governments had not approached an end to trade deal negotiations, importers began to worry that the 25% increase would be implemented.

But President Trump tweeted over the weekend that the trade deal deadline, and the tariff increase, would be postponed. Progress is reported to have been made on issues including “intellectual property protection, technology transfer, agriculture, services, currency, and many other issues,” but how to enforce a trade deal is still unknown.

Another deadline has not yet been announced. Also, please take note that tariff changes are not immediately or formally implemented upon announcement or tweet. Keep an eye out for more information about how this process works in full from our customs experts later this week.

Continued Impact on Farmers

U.S. machinery sales slowdown: Deer & Co. has reported that orders of tractors, combine harvesters, and other farm equipment have slowed compared to previous quarters. Uncertainty around China and U.S. trade relations has been cited as the cause, as farmers are hesitant to invest in machinery when prices for commodities like corn and soybeans have fallen as a result of the trade war.

Russia agriculture sees growth: The tariffs implemented on U.S. soybean exports to China severely damaged the U.S. soybean industry, but Russian farmers have prospered from the U.S.-China trade war. Russia’s trade with China rose over 27% last year, and soybeans have seen 10X trade growth over the past four years. The U.S. and China trade war has created a gap in China’s agricultural imports, allowing Russia to sell “all [they] can grow,” although whether Russia will actually be able to meet China’s demand is still to be determined.

Shippers Continue Preparing for Tariff Impact

Tesla front-loads imports: Tesla imported as many vehicles it could in preparation for the end of the trade deal truce on March 1st. China’s suspension of their 25% tariff on U.S. autos and parts will apply through the month of March, but if lifted, higher duties would make the cars much more expensive compared to competitors’. If the U.S. increases tariffs up to 25% on Chinese goods, the costs of the materials that are exported from China to the U.S. assembly plant will increase, and have a domino effect on vehicle prices.

Exclusion Process for Section 301 List 3 Coming Soon

It was announced on January 11th that no exemptions would be made for the third list of the section 301 tariffs, but the USTR decided otherwise after an end to the trade war was considered doubtful. On February 15th Congress directed the USTR to establish an exclusion process by March 17th for the list 3 goods that have affected most importers. This process will likely be similar to the process for the first two lists.

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