Letter from the CEO of J.M. Rodgers

Greetings!

After the imposition of new duties on steel and aluminum and then new tariffs on a large swathe of Chinese products, tariffs continue to be the hot topic in international transportation. Hot on the heels of their Section 301 tariffs that went into effect a few days after Independence Day, on July 10 th it was announced that the Trump Administration would pursue an investigation on the efficacy of imposing 10% tariffs on roughly $200 billion worth of imports.

The $200 billion number is significant, as it is a number roughly equivalent to the amount of China’s imports from the USA. The tariffs can be seen as a way to reduce the trade imbalance between the US and China.

The tariffs are not a given, as the outcome of the investigation that is expected in late August will determine if this is the justified route. If it does take effect, it will be a significant escalation in the ongoing tariff battle, as the first round only implemented tariffs on one-quarter the amount of imports.

This round of tariffs aims to strike more directly at the heart of the Chinese economy, especially targeting many products that have been in focus as part of China’s “Made in China 2025” plan that seeks to benefit Chinese manufacturers.

Following the first round of tariffs that were imposed on July 6th, Beijing responded in kind by imposing their own 25% tariff on major US exports, hitting major industries such as juice, whiskey, fish, cigars, soybeans, ginger, and electric cars. China also backed off of an earlier pledge to purchase agricultural and energy products from the USA.

How Will This Affect You?

The first two rounds of tariffs, while large, were limited to a relatively small amount of the trade between the USA and China. With a total import value just exceeding $500 billion, the tariffs placed on the first round only accounted for 2% of total imports. If the full proposed amount of $200 billion is enacted, it will mean fully 40% of all imports from China will be facing a 10% duty, adding a total of $20 billion in additional costs for importers.

The trade war fears have already begun to affect domestic American manufacturers. Iconic motorcycle company Harley Davidson has announced the offshoring of some manufacturing capacity to Thailand and electric car startup Tesla Motors has announced a plan to build one of the largest car factories in the world in China, currently the world’s hottest electric vehicle market.

Duty Drawback

It has not yet been determined if these additional duties will also be subject to being refunded through duty drawback, though in the last round of Section 301 duties they did allow it. Based on what we know we believe this will be the case for the next round as well, and so exporters should be the companies that see the least total impact from these

Contact J.M. Rodgers for Additional Information

If you’re not sure that your products will fall under these new tariffs or want to inquire about drawback as a way to seek some refund of these duties, please contact Andrew Galloway our VP of Sales at agalloway@jmrodgers.com. He will give you a full analysis of what your estimated duty increase would be and discuss methods to mitigate their impact through JMR’s services.