Trade & Tariffs – an update

USTR clarifies Section 301 duties

The last two weeks have been wild with speculation, information and updates regarding the U.S. positions on trade with a number of our partners. The duty increase on the first three lists of Section 301 duties on Chinese goods that was to happen on October 15th (itself a date that was originally postponed for two weeks as a gesture of good will towards China’s 70th anniversary happening October 1st, 2019) was delayed indefinitely as both parties found some common ground in negotiations that we hope will lead to a strong trade agreement. The US and Japan reached a preliminary agreement on a new trade deal that should see 90% of US imports to Japan become duty free or receive preferential trade status. Late last week, Mexico offered to provide almost a billion dollars to improve labor conditions over three years, in an effort to seal up the USMCA agreement that’s stalled over human rights issues.

While the world waited for the increase in Chinese tariffs set for October 15, 2019 we were thrilled to hear that the negotiations between the US and China, often halted over difficulties reaching agreement, had improved to the point a 5% increase in the first three lists was postponed indefinitely. The tariffs haven’t been cancelled or eliminated, neither have they been repealed by the talks. If negotiations break down, it’s still very possible the increase will happen. The final half of the list 4 tariffs, most of which are consumer goods, was originally delayed until December 15th to unburden the holiday shopping season. Those tariffs have not yet been postponed or cancelled, instead they’re still pending as a reminder to the Chinese negotiators that the US is operating in good faith for a solid resolution for both parties. We will continue to update this as more information becomes available.

The US and Japan agreement is still in the early stages, but looks very promising as Japan will begin buying up large amounts of US agriculture products, including beef and pork, at little to no tariffs. These industries have been hard hit by the trade tensions between the US and China, so it’s a welcome relief that other outlets are being found for farmers. Digital trade also features heavily in this agreement and the notice/fact sheet states this agreement will meet the gold standard on digital trade rules set by the USMCA.

Speaking of the USMCA, on October 17th, Mexican President Andres Manuel Lopez Obrador pledged $830 million more over the course of three years to improve labor conditions and build strong worker’s unions to protect laborers working in Mexico. The pay gap between our countries has been a sticking point for years as US companies exploit Mexican workers at a lower price and with a lower standard of employment to improve their profit margins. Democrats in Congress are far more supportive of this agreement now that there are worker provisions and promises attached to the USMCA. The $830 million is in addition to $69 million that was pledged for 2020, bringing the total investment into labor to roughly $900 million over three years.

As more information becomes available, you can count on us to keep you updated. If you want to know which new or pending tariffs impact your cargo, feel free to call your Edward J. Zarach & Associates’ representative to discuss.