On Friday, August 23, the Trump Administration announced an increase in Section 301 tariffs following China’s announcement of retaliatory tariffs targeting $75 billion of US goods. The announcement, which came by way of tweet, provided that Section 301 tariffs on all List 1 through 3 goods would be elevated from 25% to 30% effective October 1. In addition, the administration announced that tariffs on List 4 goods-the first tranche of which goes into effect at 12:01 am EST on September 1, would be elevated from 10% to 15%. Though not expressly stated, we expect this increase to be applied against both List 4A and List 4B (with List 4B currently being set to go into effect December 15).
With the 2020 presidential election cycle already underway, it is unlikely that we will see much in the way of Chinese effort to reach a resolution with the Trump Administration. Rather, China should be expected to adopt a “wait and see” policy in hopes they find themselves dealing with a new administration following the election. President Trump has already commented that if he is reelected, China would come running to the table with a “phenomenal deal.” President Trump’s recent comments and prior actions suggest that if he does win reelection, we may see an emboldened approach to dealing with China on trade issues.
Though the trade war is hitting American importers and consumers hard, it is also having a significant negative impact on China, who is struggling with a dwindling labor force and slowing of the domestic economy. Notwithstanding, China may be better positioned to continue the fight and it is highly unlikely that President Xi will back down on key issues, including the Made in China 2025 strategic plan. Ultimately, we are not seeing indications that this dispute is nearing any resolution in the foreseeable future absent a major policy shift from the US.