A major theme of the last several years in international trade has been the resurgence in the importance of tariffs, as countries around the world begin to use them to further their interests in domestic economies in a globalized world. This trend continues into 2021, with a bevy of tariff changes upcoming here is our 2021 tariff outlook.
Over the last few years, many tariffs on European goods have been introduced in response to a long-running lawsuit that was concluded in 2018. While the original tariffs included planes and were focused on foods, this week the tariffs were expanded to be even wider-ranging, adding in many aircraft parts, wiring, and specialty European liquors. The reasoning behind this was based on the US government’s statements that the EU has not moved sufficiently to cure this dispute, so more tariffs are needed.
These tariffs loom large over post-Brexit negotiations between the UK and the USA. The UK left the Customs union of the EU at the end of 2020, and negotiations between the two countries have continued ongoing. While the new tariff measures do not apply to the UK, the previous ones still do, and these along with nearly every other aspect of trade between the countries is yet to be announced. A last-minute agreement between the EU and UK was announced only a few days before the official exit of Britain from the EU, so negotiations with the US can be a larger focus.
One country that may see new tariffs soon is Vietnam, as several investigations from different US government agencies leave it vulnerable to new duties. Vietnam was recently tagged as a “currency manipulator” by the US Treasury department, a move that opens up the possibility that all imports from the southeast Asian nation would be subject to new section 301 duties. The second is an ongoing investigation into its timber industry, which feeds a mainstay of the Vietnamese export market: furniture. Vietnam has been a big beneficiary of the US/China trade war, as manufacturers have moved there to avoid cost increases. The potential of these tariffs could have a major effect on Vietnam’s economy.
Finally, many companies in the US will begin to again feel the bite of tariffs returning as temporary exclusions to China tariffs expired at the end of the year. The full 301 tariff amount, usually between 7.5%-25%, will now apply for any products under the lists. There is no indication that the exclusions will be extended outside a very narrow subset of mostly medical-related supplies, and thus far there is no clear guidance on how the incoming administration may handle them. Importers beginning to see these should begin investigating their potential for duty drawback right away to ensure they can minimize their impact.
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