The United States Has Come Up With The Latest Tax Increase Rules For 550 Billion US Dollars In Chinese Goods Exported To The US.

Recently, US President Trump announced that it would raise tariffs on Tariffs of about 550 billion US dollars on Chinese exports to the United States, and claimed that "requiring US companies to leave China". Recently, the office of the United States trade representative confirmed by the communiqu that the new tariff will be introduced on schedule. In the US $300 billion total of US $15% exports to China, including clothing, footwear, smart watches, Bluetooth headsets and flat-panel TVs, the tariff will be increased in two batches in October 1st and December 15th.

There is international opinion that the US side has seriously trampled on multilateral trade rules, threatening the global industrial chain and supply chain security, and dragging down international trade and world economic growth. The implementation of unilateralism, bullying trade protectionism and the ultimate pressure on the United States will take its own fruit.

Pre announcement disclosure of U.S. and Canada tariff rules

In response to U.S. President Trump's decision on tariff increase announced last week, the US Federal chronicle website issued a pre announcement in August 27, 2019 and August 29th respectively.

According to the August 27, 2019 announcement, the tax rate of $300 billion under the 301 measures announced in August 20, 2019 will be increased from 15% to 15%. The announcement will be released on USTR website in August 30th. According to this announcement, the annex Annex A of the original August 20, 2019 announcement relates to the product (listing 4A), which will levy a 15% tax rate in September 1, 2019. The product (listing 4B), which is related to the annex Annex C part of the August 20, 2019 announcement, will levy a 15% tax rate in December 15, 2019.

List of tariff added products coming into force in September 1, 2019

List 4A – Effective September 1, 2019

List of tariff added products coming into force in December 15, 2019

List 4B – Effective December 15, 2019

The August 29, 2019 announcement said that the product tax rate would be increased from 25% to 30% under the list of $250 billion, including Listing 1 ($34 billion), Listing 2 ($16 billion), and Listing 3 ($200 billion). In response to this announcement, the United States has opened a public appraisal session, inviting parties to submit written comments on this amendment, and the deadline for submission of the written opinion is September 20, 2019. All written comments should be submitted electronically (www.regulations.gov) in English. The related tax rate will be effective from October 1, 2019.

Due to the US Labor Day on Monday (September 2nd), the announcement is expected to be released on the USTR website on September 3rd (Tuesday).

Necessary conditions for Sino US trade negotiations

In August 24th, when the US side announced that it would further raise tariff rates on goods exported to China, a spokesman for China's Ministry of Commerce issued a statement saying that China firmly opposes this. Such unilateral, bullying trade protectionism and extreme pressure act, contrary to the consensus of heads of state of China and the United States, violating the principle of mutual respect, equality and mutual benefit, seriously undermining the multilateral trading system and the normal international trade order, and will surely take its own fruit. China strongly urges the US side not to misjudge the situation, do not underestimate the determination of the Chinese people, and stop the wrong practices immediately, otherwise all the consequences will be borne by the US side.

Prior to that, the Customs Tariff Commission of the State Council of China announced that tariffs of $10% or 5% were added to goods originating in the United States, and the two batches were implemented in September 1st and December 15th.

The Chinese side said that the adoption of tariff measures by the Chinese side is a forced move to deal with unilateralism and protectionism in the US. China once again reiterates that cooperation is the only right choice for China and the United States. Win-win situation can lead to a better future. I hope China and the United States will resolve differences based on mutual respect, mutual equality and words and deeds, as well as mutual agreement between the two sides, and actively build a balanced, inclusive and win-win new Sino US economic and trade order. We will jointly safeguard and promote reform and improve the multilateral trading system and promote mutually beneficial and win-win cooperation with other countries in the world.

The Customs Tariff Commission of the State Council will continue to eliminate tariffs on commodities in the US and Canada. In the list of $75 billion merchandise, the excluded commodities that have been audited and determined shall not be subject to any customs duties imposed by the 301 measures against the United States according to the exclusionary method. If the goods excluded from the first two batches are excluded, they will be included in the third batches which can be applied for exclusion.

At present, the global market is still anxiously looking forward to the next round of Sino US trade negotiations. US Treasury Secretary Mnuchin told Bloomberg news on August 28th that US trade officials were looking forward to the visit of Chinese negotiators to Washington, but he did not want to indicate whether the planned September talks would be held as scheduled. On August 29th, the spokesman of the Ministry of Commerce of China said at a regular press conference that the two sides were discussing the issue on the September consultation with the United States. "The most important thing is to create the necessary conditions for the two sides to continue consultations."

US Businessmen plunge into collective anxiety

"The US China trade war is about to turn to consumers". With the advent of the Trump administration in September 1st, which will impose a 15% tariff on about 125 billion US dollars in Chinese exports to the United States, quite a few businessmen in the United States are in a collective anxiety. They have jointly written to the president and sent copies of the senior government cabinet members to the Sino US trade consultation, demanding that the tariffs on Chinese products be postponed or cancelled.

"70% of the shoes sold in the United States are made in China," UPI said in August 28th. It is estimated that every American family will have to pay 1500 to 2000 dollars a year.

On August 28th, the United States Free Trade Association, comprising more than 160 American business organizations, sent a letter to Trump asking him to postpone all tariffs on Chinese goods, saying that tariffs would hurt workers and consumers and would adversely affect the economy.

According to the joint letter, they represent every part of the US economy, including manufacturers, farmers and agribusinesses, retailers, technology companies, service providers, natural gas and oil companies, importers, exporters and other supply chain stakeholders, providing employment opportunities for tens of millions of Americans through a huge supply chain. Unfortunately, the tariff increases in September and October will still impact a large proportion of holiday products, even higher than the original ones. Because some products face tariffs of up to 30%, many enterprises have no choice but to pass these costs on to consumers. Rising prices may affect consumers' holiday shopping.

Also in August 28th, the American footwear and footwear Dealers Association, including 200 American footwear dealers, issued a joint letter to Trump asking Trump to cancel tariffs. The US CNBC website said in August 28th that the joint letter signed by companies including Adidas said that the original average tax rate of footwear was 11%, and that it would also impose a 15% tariff. The tariffs on some footwear would be as high as 67%, which would bring us $4 billion extra cost per year. "It is impossible for the RMB to depreciate, and 15% of the tariff on footwear products should be devalued, and the RMB must depreciate by 40%." Plester, the head of the footwear and footwear Dealers Association of America, said: "Trump needs to know that the new tariffs will hurt employees and their families. Tariffs will eroding employment growth, and they are job killers. We hope that the president will listen to the voice of the whole American people and stop this unnecessary trade war.

Who will pay the duty in order to pay the bill?

Some analysts believe that American importers will not be willing to bear the additional cost alone after paying the added tariffs. In accordance with the principle of maximizing profits and minimizing losses, they will try to shift the tariff burden within the scope of their capability.

Generally speaking, there are two ways to transfer. First, shift to the upstream of the international commodity supply chain. When negotiating transaction prices with Chinese exporters, the tariff burden should be included in the transaction price components in advance, and by adjusting the import price formula to serve or force Chinese suppliers to bear part of the tax burden. The two is to shift to the downstream of the supply chain. When selling products to downstream manufacturers or end consumers, some tariff costs are transferred to them by raising the selling price.

The shift of tax burden is a market game process. Finally, how much or even whether it can be transferred or not depends on the market position, supply and demand, negotiation skills, commodity and market substitutability, price elasticity of demand and so on, and the specific circumstances of each transaction will be different. But it is certain that the final outcome of the shift will inevitably be that the entire commodity supply chain and the industrial chain will become the victims of the US tariff increase. As the terminal of this chain, American consumers are bound to be the ultimate buyers and the biggest victims.

Therefore, after the United States announced that it would impose additional tariffs on China's exports to the United States, Gary Shapiro, the president of the consumer Technology Association, publicly condemned the Trump administration, pointing out that the move not only disrupted the market, but also harmed the interests of American workers, farmers, consumers and enterprises, and had a serious impact on the US economy.

"The Sino US trade war will hurt everyone in the long run," Sue Bo Raman Lam, director general of the Asia Development Bank of the Asian Development Bank in Washington on August 28th, said in an interview with Chinese media that it is impossible to predict exactly how long the trade war will take. "My personal forecast will last for about a year and a half." He said that from 6 to 12 months, Vietnam and Thailand could benefit from the Sino US trade war in the short term, but not for a long time, because neither Vietnam nor Thailand can replace China made. If the Sino US trade war continues to escalate, it will have more negative effects on the economies of Asia and the rest of the world. Source: CCCT, people's daily, learning times, Global Times