As IndustryNet reported last month, tariffs on $250 billion worth of Chinese goods were raised from 10% to 25% effective May 10th and the U.S. has also threatened to raise tariffs on another $325 billion more. This would effectively tariff all Chinese imports to the United States.
President Trump characterized ongoing trade negotiations as progressing “too slowly” and effected the tariff hike in response.
Meanwhile, U.S. and Chinese officials have agreed to resume trade talks ahead of the upcoming G20 summit in Japan.
Despite any progress that may come with future negotiations, manufacturers that rely on imported goods are nonetheless feeling the pain.
Just this week, more than 300 companies descended on Washington to warn government officials about the cost the current trade war is having on their business and the subsequent impact on the U.S. economy, arguing that the tariffs give advantage to foreign competitors, who do not make their products in China.
Said the General Manager of HP, as quoted by CNBC: “For the printing supplies industry, these tariffs do more damage to the consumers and intellectual property holders like HP than it will do to the IP infringing products.”
Concerns over tariff action and fears of a trade war have clouded manufacturers’ optimism, even as U.S. manufacturing continues to expand.
Over the past year, prices have spiked in anticipation of greater tariffs and the tariff issue has loomed large among manufacturing executives’ concerns.
Many manufacturers are seeking exemptions to the tariffs. But how successful are they? We’ll take a look at that. But first, some background.
Timeline on Chinese Tariffs
U.S. tariff action on China has gone through many phases throughout the year. Here are some of the major developments:
• The USTR finalized tariffs on $200 billion of Chinese imports to the U.S. in September 2018 in an effort to address unfair Chinese industrial policies. The finalized list represents roughly 50% of all Chinese goods imported to the U.S.
• The USTR’s initial plan was to impose a 10% import tariff September 24th 2018 on the list of nearly 6,000 Chinese products, with the remaining 15% implemented January 1st, 2019.
• China then retaliated with its own list of import tariffs on $60 billion worth of U.S. goods at rates between 5-10%
• However, following a fruitful meeting at the trade summit in Buenos Aires in December, the U.S. and China agreed to delay the full implementation of their respective tariffs for 90 days until March 1st.
The Trump administration then abruptly changed course in early May, raising import tariffs to 25%.
List of Products Currently Affected by Tariffs
The full list of Chinese products subject to the current 10% tariffs encompasses a large range of Chinese imports, including raw materials and industrial chemicals. That list full can be found here.
Submitting an Exemption
The United States Trade Representative distributed instructions for obtaining an exclusion for Chinese products subject to tariffs. That form can be found here. However, now that we are on our third round of tariffs, manufacturers must apply for exemption for “List 3” goods.
The 25% tariff applies to this list, for goods exported from China on or after May 10th. More on that here.
On June 30th the USTR will publish a new form for submitting exclusion requests for List 3 goods.
You can find that here and it’s a good idea to prepare your exclusion request ahead of time.
But how likely is it that your exemption will be approved?
The answer is it depends on how you look at it.
According to Roll Call, 46% of companies that have applied for exclusions have been approved – at least on a preliminary basis.
What Criteria Does the USTR Use to Determine Exclusion Eligibility?
The main factor the USTR is looking at is whether or not a given item on the tariff list is available only in China or cannot be produced domestically in the quantity or quality needed.
Take the case of these two aerosol can manufacturing firms. As reported by CNN, aerosol can manufacturing firm Ball Metalpack was slapped with tariffs and was subsequently forced to lay off workers. Meanwhile, its rival, DS Containers, has seen business thrive and even added workers because they were granted the exception.
Why?
Simply because DS Containers uses a plastic-laminated steel that is currently not produced domestically.
However, it does not appear that all companies that fulfill this requirement are being granted an exemption, as outlined in this letter from U.S. Rep. Jackie Walorski (R-Inc.)
What States are Most Impacted?
Data collected by QuantGov finds that certain states are more affected than others when it comes to exclusion denials.
Using QuantGov microdata, IndustryNet determined that the states of Ohio, George, Wisconsin, North Carolina and Virginia received the most aluminum exclusion denials, while Illinois, Texas, Michigan, California and Indiana received the most steel exclusion denials.
On a percentage basis, the states of Minnesota, Virginia, Texas, South Carolina and Ohio were the most likely to receive a aluminum denial, while Nevada, Mississippi, Tennessee, West Virginia and Florida were most likely to receive a steel denial.
QuantGov has an interesting interactive map with all of the exclusion/denial data here.
Notable Companies Seeking Exclusions from the USTR
According to IndustrySelect’s database of 400,000 U.S. manufacturers, roughly 43,000 manufacturers in the U.S. rely on imports for the production of goods.
When it comes to obtaining a tariff exclusion, it does not help to be famous. Unless you’re Tesla.
The electric vehicle manufacturer recently won an exemption for imported aluminum, giving them tariff-free access to 10,000 tons of aluminum sourced from Japan.
However, Tesla was denied an exemption for its Model 3’s screen and computer.
The administration denied an exclusion request from GM, The same is true for Whirlpool’s door handles And Allegheny Technologies Inc’s products.
Even Bible publishers are warning that the tariffs could result in a “bible tax.” Most Bibles are currently printed in China and printed books are on the fourth list of items subject to future tariffs.
So if the Bible isn’t even safe, what’s a manufacturer to do?
Finding Domestic Suppliers
Companies continue to turn to industrial marketplaces like IndustryNet to locate domestic suppliers of materials and goods.
IndustryNet maintains up-to-date information on over 400,000 U.S. manufacturers and suppliers of more than 10,000 products and services.
IndustryNet lists suppliers across a range of industries, producing everything from steel and aluminum to air compressors, conveyor belts and printed circuit boards.
Visitors can set up a free user account, build custom lists of potential suppliers, send quote requests, download catalogs, view company photo and video libraries, and more.
IndustryNet is also a direct path for U.S manufacturers to increase their visibility among domestic industrial procurers. Learn more about our marketing solutions.
