Only time will tell what China will do in response to tariff threat
At 12:01 tomorrow (Friday, May 10) morning, the United States is expected to increase tariffs from 10% to 25% on $200 billion worth of Chinese products. The increase in these particular tariffs were delayed twice since the investigation determination was published in the Federal Register on Sept. 21, 2018. The rate of additional duties in effect since Sept. 24, 2018, was 10%.
Under Annex B of the Sept. 21 notice, the rate of additional duty was set to increase to 25%on Jan. 1, but on Dec. 19, the U.S. Trade Representative published a new directive in the Federal Register, postponing the increase in the rate of the additional duty to 25% until March 2.
After considerable negotiation between the United States and China, on Feb. 24, the president directed the USTR to again postpone the increase in tariffs. The bump from 10% to 25% on May 10 ends the speculation as to when/if the increase in tariffs would occur.
When the United States initially applied the additional 10% tariff on Chinese goods in September 2018, China retaliated with tariffs of 5% and 10% on a wide variety of U.S. goods, including a number of agricultural products.
While China has vowed to retaliate further once the increase from 10% to 25% goes into effect, they have not publicly released a list of products that would be subject to additional retaliation. There are three possibilities: China could simply increase the tariffs from its September retaliation list, increase tariffs on a new set of products or they could choose yet another means of retaliation. Unfortunately, only time will tell.
In the meantime, we have updated the tariff schedule of U.S. food and agricultural products subject to China’s response to the U.S. 232 and 301 Investigations. The cells that are highlighted in pink are the retaliatory tariffs that resulted from the initial 10% tariff applied by the United States in September 2018.
Veronica Nigh is an economist for the American Farm Bureau Federation