Repeat After Me: There Will be no US-China Trade Deal.

• Part 1: 749 items will be imposed with a 10% tariff, including: coffee, corn, caviar, chemicals, cars, buses, scooters, bikes
• Part 2: 163 items will be imposed with a 10% tariff, including: cars, motorcycles
• Part 3: 634 items will be imposed with a 5% tariff, including: whiskey and cigars
• Part 4: 1815 items will be imposed with a 5% tariff, including: wood, floors, doors, clothing, CDs, TVs, lights, automobile parts, pens

We contemplated translating the full list of products to show the breakdown as between those products that will be hit by a 5% versus a 10% tariff increase, but decided that would take too much time and is not really necessary because the Chinese language lists set out the tariff numbers. See China Tariff List 1 and China Tariff List 2.

— China Tariff Exclusion Requests Have an October 18 Deadline

With its previous round of tariff announcements back in May, China announced it would initiate an exclusion request process for companies that import, manufacture, or use the U.S. products subject to China’s retaliatory tariffs and U.S. companies that do not have their own Chinese entities (such as a WFOE) should ask their Chinese customers to see if they would be willing to submit an exclusion request for their products. Some of our American clients that sell their products into China via Chinese importers and/or Chinese distributers did that and their Chinese importers/distributers have mostly responded by saying  they would do so, so long as the American company pays some or all of their attorneys’ fees and costs. Applicants for these exclusions are to submit their exclusion requests through the China Tariff Policy Research Center of the Ministry of Finance website. Each request must be limited to a single product and must identify the eight-digit tariff heading.  Exclusion requests will be considered based on the difficulty to obtain the imported U.S. product from other sources (domestic, third-country), and also of any structural impact on the relevant Chinese industries.

The deadlines for submitting exclusion requests on products previously tariffed by China depended on the particular tariff line and tariff list. Exclusion requests for certain excluded products were to be submitted by July 5, 2019 (so you are too late for that) and exclusion requests for other of the products are to be submitted from September 2, 2019 to October 18, 2019. This means if your product was on the lists for which you are not too late to apply for an exclusion.

— New US Tariffs on Chinese Products

In retaliation for China’s increasing its tariffs against US goods (which were in retaliation for the US imposing tariffs on Chinese goods), President Trump issued a series of tweets, setting out the following:

1.  On October 1, the US will increase tariffs by 5% on $250 billion in goods already subject to 25% tariffs.

2.  The US will increase tariffs by 5% on the remaining $300 billion in Chinese goods (mostly consumer items) that are set to be subject to a 10% effect  beginning on September 1 or December 15.

3.  “Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing our companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States. Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop – it didn’t. Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!”

Today, China announced it will impose unjustified tariffs targeting U.S. products.  In response to China’s decision, and in order to achieve the objectives of the China Section 301 investigation, President Trump has instructed the United States Trade Representative (USTR) to increase by 5% the tariffs on approximately $550 billion worth of Chinese imports.  For the 25% tariffs on approximately $250 billion worth of Chinese imports, USTR will begin the process of increasing the tariff rate to 30%, effective October 1 following a notice and comment period.  For the 10% tariffs on approximately $300 billion worth of Chinese imports that the President announced earlier this month, the tariffs will now be 15%, effective on the already scheduled dates for tariff increases on these imports.

USTR will publish in the Federal Register as soon as possible additional details on today’s announcement.

— What This Latest US-China Tit-for-Tat Means for Your Business

We assume you understand the tariffs on both sides mean increased costs for those who manufacture product in China for sales to the United States and vice-versa. As to who will pay those costs and what you can do to try to reduce those costs, we urge you to read Who Pays the Tariffs on China Imports? President Trump vs. CNN and What YOU Can do NOW to Reduce Your China Price.

But what should you make of President Trump’s “ordering” US companies to immediately start looking for an alternative to China.” Trump can’t really do that, can he?”  No, but that is essentially what Trump has been doing since this trade war began. He cannot literally require American companies to pull out of China, but he can make it so that they all but must do so and most of the international lawyers and international trade lawyers at my firm have come to believe this has been his plan all along. Trump has every step of the way made it all but impossible for China to make a trade deal with the United States — which is why we have all along been clear there will be no trade deal. If this trade war (which let’s face it is now a cold war) were really about trade imbalances, it would have ended long ago with China buying more soybeans and Boeing airplanes. But from the very beginning, the U.S. has demanded China stop stealing IP and open its market for foreign companies and there is just no way China will ever agree to either of those things and lead negotiator Robert Lighthizer is without a doubt smart enough to have known this. All this leads us to believe that the US plan all along was to force a slow decoupling of the US and China and then work on convincing the rest of the Democratic world (the EU, Australia, Canada, Latin America, Japan, etc.) to decouple from China as well. A classic cold war strategy.  In June, in Does China WANT a Second Decoupling? The Chinese Texts Say That it Does we wrote of how China wanted this decoupling as well.

This latest Trump “order” does not have the force of law so in that respect it is not an order at all. But in most other respects it is. This order indicates Trump’s passionate desire to rid the United States of what he sees as the China scrouge. More importantly, it is yet another clear signal that he will continue to escalate this war with China until such time as he considers the United States to be victorious. The fact that Trump issues this “order” amidst rising recession fears only highlights how ending US-China trade is at the top of his to-do list.

So in terms of what this means for your business, it means that you must stop believing there will be a solution to the trade war that will allow you to go back to doing business with China the way you used to do business with China. You need to instead recognize that this situation is the New Normal as between the United States and China and that, if anything, things are way more likely to get worse than they are to get better.