You’d be forgiven if you’re having a hard time keeping up with the tariff-related news these days. The fact is, the Trump administration has either implemented or proposed so many different types of levies that it’s now virtually impossible for the average American to keep tabs on what’s going on.
The confusion applies across the board. Even if you manage to figure out who’s already been taxed, who’s likely to be taxed next and which goods are in the crosshairs, you’re still not really up to speed because the President hasn’t decided whether to go through with several of the proposals he’s made and just in case it needed to be a little more ambiguous, he still hasn’t figured out what tariff rate to apply to his theoretical second round of 301-related duties on China.
Analysts and journalists have made a valiant effort to try and come up with visual guides, but in many cases, the graphics they produce are out of date within days, depending on whether the news cycle is running on “manic” (the usual Trump-era pace) or “covfefe” (the pace it gets cranked up to when the President feels like nefarious foreigners have slighted him and/or when he gets the idea that the base isn’t riled up enough on a given day).
Last week, Trump instructed Robert Lighthizer to ponder hiking the proposed tariff rate on an additional $200 billion in Chinese goods to 25% from 10%, a move that proved to be a bridge too far for the Chinese, who responded on Friday.
In a testament to just how absurd this has become, Trump’s 25% threat amounted to an escalation of an escalation of an escalation. The threat to slap tariffs on another $200 billion in imports from China was itself a step up from the $50 billion in goods Trump began taxing on July 6. When Trump initially indicated he would consider additional tariffs after duties went into effect on the first $50 billion in imports, Beijing warned him that the publication of a list in conjunction with those additional tariffs would be considered an affront. Well, he went ahead and published that list anyway on July 10. So that’s two escalations. The prospect of more than doubling the rate applicable to the goods on that list was thus an escalation on top of the second escalation. And believe it or not, that’s not even the whole story.
Remember, the initial 301-related tariffs were broken up into two tranches. Duties on $34 billion in goods went into effect on July 6, while levies on the remaining $16 billion in goods ($34 billion + $16 billion gets you to the total $50 billion for the first 301 tranche) were put off for another couple of weeks. The assumption was that Trump would wait to publish a list in conjunction with the prospective tariffs on an additional $200 billion in Chinese goods until he had at least implemented the duties on the $16 billion in goods that remained to be taxed from the first tranche. While it wasn’t surprising that the USTR published that list on July 10, it was rather alarming that the administration published it before they even fully implemented the initial set of 301-related duties. So really, even the timing of one of the three escalations related to the prospective next round of tariffs was itself an escalation.
And yes, this is all just as absurd as it sounds. Don’t shoot the messenger here, I’m not the one pulling the strings on this lunatic plunge into protectionism.
Here’s a graphic from Goldman that does a good job of summing up this insanity, but do note that the second 301 tranche is now much more likely than 60% (or at least in my mind it is) and as detailed above, the rate could be 25% now instead of 10% depending on how things go.
(Goldman)
Why bring this madness up again on Tuesday evening? Well, because now we have an official date for the imposition of the duties on the remaining $16 billion from the first round of 301-related tariffs. That date is August 23.
“The Office of the United States Trade Representative today released a list of approximately $16 billion worth of imports from China that will be subject to a 25 percent additional tariff as part of the U.S. response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property”, the USTR said on Tuesday, on the way publishing the final list for this tranche which contains 279 items, down from the original proposed 284 lines.
In case you need a reminder of why Trump is doing this, Lighthizer is happy to regale you with the following quick, bullet point recap of the findings from the USTR’s 301 investigation:
- China uses joint venture requirements, foreign investment restrictions, and administrative review and licensing processes to require or pressure technology transfer from U.S. companies.
- China deprives U.S. companies of the ability to set market-based terms in licensing and other technology-related negotiations.
- China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer.
- China conducts and supports cyber intrusions into U.S. commercial computer networks to gain unauthorized access to commercially valuable business information.
So there you go. Someone in Washington finally remembered that in order for Trump to get to the real tariffin’, he needed to get the second tranche of the first round implemented.
Now that we have a date on that, we can get to the “good” part, where the White House starts taxing everything China exports to America, because let’s face it, that’s the end game here.
