Trench warfare continues in what the Chinese Ministry of Commerce describes as “the biggest trade war in economic history.”

In the latest exchange, the Trump administration in early July added $34 billion of Chinese imports to the list of products on which it will impose tariffs and China responded by imposing retaliatory tariffs on $34 billion of American goods. The 545 items targeted by that nation include automobiles and agricultural products.

Although President Trump said in June that he has a “great friendship” with Chinese Premier Xi Jinping, he insisted that, “Trade between our nations, however, has been very unfair, for a very long time.”

“The United States will pursue additional tariffs if China engages in retaliatory measures, such as imposing new tariffs on United States goods, services, or agricultural products, raising non-tariff barriers, or taking punitive actions against American exporters or American companies operating in China,” Trump said. He later raised the prospect of imposing tariffs on an additional $500 billion in Chinese products.

And trade disputes that began with U.S. steel and aluminum tariffs continue with Canada, Mexico and the European Union.

While the nation’s economic indicators do not appear to have been greatly affected by the tariffs yet, some sectors and businesses have indicated that the trade restrictions are becoming too costly for them. For example, General Motors warned that tariffs “could still lead to less investment, fewer jobs, and lower wages for our employees,” while Harley Davidson announced that it will move some production overseas because “the tremendous cost increase, if passed on to its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region.” The president of the American Soybean Association, meanwhile, noted that China is the biggest market for U.S. soybean exports and said, “The math is simple. You tax soybean exports at 25 percent, and you have serious damage to U.S. farmers.”

The U.S. Chamber of Commerce has devoted a section of its website to illustrating the state-by-state impact of tariffs, which it says “are nothing more than a tax increase on American consumers and businesses.”

While the Federal Reserve Federal Open Market Committee raised interest rates for the second time this year at its June 12-13 meeting, boosting the target range for the federal funds rate to 1.75 to 2 percent, the meeting minutes record concerns about the impact of tariffs on the economy.

“Most participants noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending,” the minutes state. The minutes also note that, “contacts in some Districts indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy,” and that, “contacts in the steel and aluminum industries expected higher prices as a result of the tariffs on these products but had not planned any new investments to increase capacity.”

Notwithstanding such worries, job growth in June remained strong, with the economy adding 213,000 jobs during the month, according to the Bureau of Labor Statistics. The unemployment rate still rose slightly to 4 percent, however, as the labor force participation rate grew by 0.2 percent.

The Bureau of Economic Analysis in June significantly increased its estimate of first quarter growth to 2.9 percent, bringing it in line with the preceding three quarters. In April and May, the bureau’s calculations of Q1 growth were 2.3 percent and 2.2 percent, respectively.

Despite the threat of increasing costs, confidence in the manufacturing sector remains high, with the Institute for Supply Management’s Purchasing Managers Index increasing 1.5 points to 60.2 at the start of July. Seventeen of the 18 industries that were surveyed reported growth. Several comments from survey panelists, though, reflect fears of the impact of tariffs, with, for instance, one noting that production at the panelist’s company will be moving from the United States to Canada and another observing that “steel tariffs continue to drive uncertainty. Projects and services using steel have limited days that prices are good for.”

The Conference Board’s measure of consumer confidence dipped 2.4 points to 126.4 in June. (The baseline for the Consumer Confidence Index is 100 in 1985.) The board’s director of economic indicators said, “While expectations remain high by historical standards, the modest curtailment in optimism suggests that consumers do not foresee the economy gaining much momentum in the months ahead.”

While the University of Michigan’s Index of Consumer Sentiment recorded a slight uptick in June to 98.2, the survey’s chief economist noted that confidence declined over the course of the month “largely due to concerns about the potential impact of tariffs on the domestic economy.”

“A longstanding belief of consumers is that trade with other countries results in a broader range of available goods at lower prices,” the chief economist said, adding, “While tariffs may have a direct impact on only a very small portion of overall [Gross Domestic Product (GDP)], the negative impact could quickly generalize and produce a widespread decline in consumer confidence.”

Housing starts in May grew 5 percent from April and increased by more than one-fifth compared to May 2017, the Census Bureau and the Department of Housing and Urban Development reported. Existing home sales, though, fell for the second straight month, declining by 0.4 percent from April to May, according to the National Association of Realtors.

“Incredibly low supply continues to be the primary impediment to more sales, but there’s no question the combination of higher prices and mortgage rates are pinching the budgets of prospective buyers, and ultimately keeping some from reaching the market,” the association’s chief economist said.

The dollar ended June trading around what has come to be its usual high level, 0.86 euros, 0.76 pounds, 110.7 yen and 6.62 yuan.

The Dow Jones Industrial Average closed at 24,271.41 on June 29, about 150 points below where it started the month. The S&P 500 Index ended June at 2,718.37 after monthly growth of about 13 points.

Thirty years ago, some in the United States fretted about steel imports from Japan, arguing that that nation was subsidizing steel production to keep the prices of its exports low. The late, great Milton Friedman dispensed with such concerns quickly. “If Japan chooses to subsidize the export of clean air to the United States, why should we object,” Friedman asked. “Isn’t that what it’s doing when it sends steel here? Here we have this great hue and cry that we should somehow or other subsidize steel, either by tariffs or quotas or other ways, to enable steel to produce both its products and its pollution at home. … Why should we object to their giving us foreign aid?” He further noted that, while imports may reduce the number of jobs in the domestic steel industry, those losses are offset by job gains in other sectors. “Overall, total employment will not be affected,” he said. “But, overall, the American consumer will be benefited because he will get the steel more cheaply and the goods made from the steel more cheaply than he otherwise would.” One should not have to be a Nobel Prize-winning free market economist like Friedman to understand that artificially increasing prices is bad for consumers and the economy, as a whole.

Steel Shorts

Commerce Department Reviewing 20,000 Applications for Tariff Exclusions

The Department of Commerce has received more than 20,000 requests for exclusions from the steel and aluminum tariffs recently imposed by the Trump administration.

Organizations and individuals can seek to be exempted from the 25 percent tariff on steel and the 10 percent tariff on aluminum by arguing that specific imported products are not readily available in the United States. Domestic manufacturers can object to the requests, though, and The New York Times reported that, according to Commerce Secretary Wilbur Ross, such an objection will make the agency more likely to reject the exclusion request.

As of June 20, the department had ruled on 98 applications, granting 42 and denying 56.

“Many of the requests are effectively requesting relief simply because the product prices are higher than they would be with the imports, and that’s not a sufficient reason to grant the exclusions,” the Times quoted Ross as saying.

Ross told the Senate Finance Committee on June 20 that his agency is investigating whether some companies are “illegitimately profiteering” from the tariffs, Reuters reported. Noting that steel costs in the United States have increased by significantly more than 25 percent recently, Ross suggested that some firms may be engaging in “speculative activity” that drives up prices.

“There’s no reason for tariffs to increase the price of steel by far more than the percentage of the tariff, and yet that’s what has been happening,” Ross said. “That clearly is not a result of the tariff. That’s clearly a result of antisocial behavior by participants in the industry.”

Trump Says No NAFTA Deal Until After Elections

A new NAFTA deal will have to wait at least until after the mid-term elections, President Trump said in early July.

The United States, Canada and Mexico have been negotiating revisions to the North American Free Trade Agreement (NAFTA), which Trump has excoriated as the “worst trade deal ever.” Talks have been complicated by trade disputes that began with the recent imposition by the Trump administration of a 25 percent tariff on imports of steel and a 10 percent tariff on imports of aluminum. Although Canada and Mexico were briefly exempted from the levies, they have been subject to them since June 1.

“NAFTA, I could sign it tomorrow, but I’m not happy with it,” Trump said on Fox Business Network. “I want to make it more fair. … I want to wait until after the election. You’re going to have an election. I think it’ll be very interesting. I think it’s going to be fine.”

In June, Secretary of State Mike Pompeo said he is “confident we will get deals” on NAFTA.

E.U. to Limit Steel Imports Because of U.S. Tariffs

European Union countries are preparing to limit imports of steel onto the continent because of the 25 percent tariff that the United States recently imposed on foreign-made steel.

European steel makers have expressed concerns about a surge in imports as manufacturers around the world try to sell more steel in Europe now that their opportunities in the United States are more limited. As a result, the European Union is expected to implement a 25 percent tariff on steel imports that exceed the average annual amount in recent years.

“This is intended to prevent the negative effects of trade diversion, but at the same time maintain traditional supply and effective competition on the E.U. market,” a spokesman for the European Commission, the European Union’s executive body, said.

Of the commission’s 28 members, 25 supported the proposal, while three abstained.

This “provisional safeguard” can remain in place for up to 200 days, while the European Union considers whether to implement more permanent actions.

Dumping Charge Against Chinese Flange Imports Affirmed

The Department of Commerce on June 5 announced an affirmative final determination in the antidumping duty investigation of imports of stainless steel flanges from China.

The dumping rate was found to be 257.11 percent.

In 2017, the United States imported $21.8 million worth of stainless steel flanges from China.

The U.S. International Trade Commission is to determine by July 19 whether the dumping activity materially injured or threatened to materially injure the domestic industry.

CUSTOMS CORNER

25% Section 301 Duties Imposed July 6, 2018 on Multiple Products from China

The United States Trade Representative (USTR) announced In a Federal Register Notice dated June 20, 2018 the list of products from China subject to additional 25% duties starting on July 6, 2018 as a remedy in the Section 301 investigation against Chinese violations related to technology transfer, intellectual property, and innovation. https://www.gpo.gov/fdsys/pkg/FR-2018-06-20/pdf/2018-13248.pdf. U. S Customs and Border Protection established a webpage providing details on the implementation of the duties. https://www.cbp.gov/trade/programs-administration/entry-summary/section-301-trade-remedies-be-assessed-certain-products-china-effective-july-6-2018.

The Federal Register Notice includes as Annex A the list of products covered, almost entirely selected articles included in Chapters 84-90 of the HTSUS. Products that are listed are subject to the normal duties that may apply, and any applicable AD/CVD duties, in addition to the 25% Section 301 duty. Covered goods entered into a foreign Trade Zone may only be admitted under privileged foreign status. Goods eligible for Chapter 98 classification are exempt from the Section 301 duties. Drawback reportedly will be available for goods covered by Section 301 duties.

While Annex A does not include any basic steel mill products, the Notice includes as Annex C a list of additional products that are being considered for application of Section 301 duties at a later date. This Annex does include steel structures and parts of structures in HTSUS 7308, with the exception of doors, windows and their frames (7308.30) and scaffolding (7308.40). Other products included are specified lubricating oils, specified plastics, specified aluminum products, and additional specified products in Chapters 84-90. Hearings will be held and written submissions accepted regarding product coverage, as set forth in the Federal Register Notice.

An exemption procedure has been established permitting requests that specific products be excluded from the Section 301 duties. Requests must be filed by October 9, and will be subject to publication and public comment. Unlike the Section 201 exclusion requests, responses to public objections may be filed. Also unlike that process, any exclusion granted will be retroactive to the July 6 effective date of the additional tariffs. https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/july/ustr-releases-product-exclusion.

Steven W. Baker

AIIS Customs Committee Chair

swbaker@swbakerlaw.com

**Welcome New Members!**

1. GATEWAY TERMINAL New Haven, CT Contact: Ed Evans Phone: 203-467-1997 (Office) eevans@gatewayt.com

Gateway Terminal is an established, fully licensed and bonded deep-water marine terminal operator handling various types of dry and liquid bulk and
break-bulk cargoes.

1. ITALINOX USA Houston, TX Robert Santurbano, General Manager Mobile: (713) 820 – 1283 robert.santurbano@italinox-usa.com

Italinox Usa Ltd. Co. is an importer from the United States, the company sell prime cold, stainless steel, stainless steel coils, steel coils, grade finish and related products to the United States market.

1. PORT OF SAN DIEGO San Diego, CA Connie Le Fevre, Sr. Trade Representative Phone: 619.686.6301 clefevre@portofsandiego.org

 

 

 

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