By SEMA Washington, D.C., Staff
The U.S. and China signed a “phase one” trade deal whereby China will buy more U.S. goods and implement some structural changes to its trade laws. However, the Trump Administration maintains that 25% tariffs imposed by the United States on List 1, 2 and 3 products will not be reduced or eliminated until November at the earliest, when the United States will review and confirm China’s compliance under the accord.
The United States began imposing tariffs on various imports from China in July 2018. Lists 1 and 2 include miscellaneous metal and rubber parts, wiring and measurement devices. List 3 covers most auto parts imported from China. The tariff rates are 25%, and collectively the tariffs cover about $250 billion in products.
In September 2019, the United States also began collecting 15% tariffs on some List 4 products. The list covers finished consumer products ranging from toys, footwear and clothing to cell phones and computers. Some of the tariffs were never imposed. For the other product lines subject to levies, the tariffs will be reduced to 7.5% on February 14.
The phase-one accord includes intellectual property enforcement measures for patents, trademarks, trade secrets and counterfeit goods. It also addresses unfair Chinese technology transfer practices, including an end to the practice of pressuring foreign companies to transfer their technology to Chinese companies as a condition for obtaining market access, administrative licenses or receiving advantages from the government. The agreement should help prevent currency manipulation with a ban on competitive devaluation and targeting of exchange rates. The agreement will include a dispute resolution mechanism via bilateral consultations with the ability to impose tariffs if disputes cannot be resolved.
A phase-two agreement will seek to address other outstanding issues, such as reducing the U.S.-China trade imbalance, addressing cybertheft and stopping Chinese subsidization of key industries. Phase-two negotiations are not expected to begin in earnest until after the November 2020 election. A reduction or removal of the 25% tariffs on List 1, 2 and 3 products may not be implemented until those negotiations are completed.
For more information, contact Stuart Gosswein at stuartg@sema.org.