US, China to suspend 15 Dec tariffs, US to cut other duties

Author: Al Greenwood

2019/12/13

HOUSTON (ICIS)--The US and China have agreed on Friday to suspend a new round of tariffs that they had planned to impose on each other on 15 December.

In addition, the US will lower tariffs to 7.5% from 15% on $120bn worth of goods, according to both President Donald Trump and the US Trade Representative (USTR). The US imposed those tariffs on 1 September as part 1 in the fourth round of tariffs. Part 2 of the fourth round of tariffs were to be imposed on 15 December, and they are now off the table.

China had retaliated with its own fourth round of tariffs, also divided into two parts. Under it, China added new tariffs on some products and increased existing ones on other products. It is unclear if China had agreed to lower or roll back part 1 of its fourth round of tariffs. .

Nonetheless, the suspension of the planned 15 December tariffs brings some relief to the US and Chinese manufacturing and chemical sectors, which have been weighed down by the trade war.

US chemical exports of $136.7bn in 2019 are set to decline 2.5% from 2018, before ticking up 1.1% to $138.2m in 2020, according to the American Chemistry Council (ACC). Imports are also set to decline by 3.9% to $104.8bn in 2019 before rising 1.2% to $138.2bn in 2020, according to the ACC.

“The export side has been hit significantly with China’s retaliatory tariffs and the slowdown in global manufacturing,” said Martha Moore, senior director - policy analysis and economics at the ACC, at a 5 December press briefing.

For commodity chemicals and polymers, China would have slapped new 10% tariffs on US low density polyethylene (LDPE), polyvinyl chloride (PVC), polycarbonate (PC), caprolactam and phthalic anhydride on 15 December. Those are now off the table.

The tariffs China implemented on 1 September added 5% duties to existing tariffs of 25% on products including high density PE (HDPE), linear low density PE (LLDPE), polypropylene (PP), polystyrene (PS) and others.

Other parts of the agreement remain murky. The US did not say when it would lower the September tariffs to 7.5% from 15%.

China said it would purchase more agricultural products from the US, but it did not specify the magnitude of these purchases.

Trump said that China agreed to "massive purchases of agriculture product, energy and manufactured goods, plus many more".

During a press conference that was dubbed in English, a Chinese government official said the country would increase imports of agricultural products "by a notable margin".

The US also would accept more agricultural imports from China, an official said during the press conference.

China is also strengthening protections on intellectual property and addressing pirated goods and counterfeits, an official said. These efforts are in line with the country's ongoing reforms.

A Chinese official said the agreement still needs some legal review, translation, authentication and other procedures before the countries sign it. The two sides are working together to establish the time, place and formalities about signing the agreement.

China said the trade agreement consists of nine chapters that include the following:

  • Preamble
  • Intellectual property
  • Technology transfer
  • Food and agricultural products
  • Financial services
  • Exchange rates and transparency
  • Expanded trade
  • Bilateral assessments and dispute settlement
  • Final clauses

Trump had described this portion of the negotiations as the phase-one deal. He said negotiations about phase two will start immediately.

THE DECEMBER TARIFFS

The US had been scheduled to impose 15% tariffs on Sunday. These covered mainly cell phones, laptop computers, video-game consoles, some toys, computer monitors and certain types of footwear and clothing.

As far as imports of chemicals and plastics, the US has already imposed tariffs on many of the products coming from China. The remaining plastic and rubber items on the 15 December list include mostly finished parts, such as tableware, picture frames and erasers.

For organic chemicals, most were not covered by ICIS. Among the chemicals included in the 15 December list, the following were the ones that had the largest import volumes in 2018.

HTS Code Product Kilograms
2931.39.00 Other organo-phosphorous derivatives, nesoi 86,976,080
2903.39.20 Fluorinated, brominated or iodinated derivatives of acyclic hydrocarbons, nesoi 67,043,152
2903.99.08 p-Chlorobenzotrifluoride; and 3,4-Dichlorobenzotrifluoride 21,478,304
2917.19.70 Acyclic polycarboxylic acids and derivative (excluding plasticizers) 21,186,125
2929.10.80 Other isocyanates, nesoi 9,934,362
2918.99.50 Nonaromatic carboxylic acids with additional oxygen function, and their derivatives, nesoi 9,594,285
2926.90.21 Aromatic fungicides of nitrile-function compounds 8,925,670
2934.20.80 Other compounds containing a benzothiazole ring system (whether or not hydrogenated), not further fused 7,922,384
2903.99.80 Other halogenated derivatives of aromatic hydrocarbons, nesoi 4,811,598
2934.20.05 N-tert-Butyl-2-benzothiazolesulfenamide 3,679,875

Source: US International Trade Commission (ITC)

The tariffs that China had planned to impose on US imports in December ranged from 5-10%. Some were new tariffs while others were increases on existing duties.

In terms of volumes, the most noteworthy of these are plastics. Among the plastics included in the 15 December list, the following were the ones that had the largest import volumes in 2018 from the US. The items that are boldfaced had been subject to earlier tariffs.

HTS Code Commodity Kilograms
39041090 Other primary shapes of pure polyvinyl chloride 318,569,405
39011000 Polyethylene having a specific gravity<0.94, in primary forms 143,228,400
39074000 Polycarbonates, in primary forms 113,492,041
39081011 Slices/chips of polyamide-6,6 50,123,380
39014090 Other ethylene-a-olefin copolymers with a specific gravity of less than 0.94 25,278,511
39077000 Poly(lactic acid), in primary forms 14,359,177
39089020 Semi-aromatic polyamides and copolymers thereof in primary forms 13,797,881
39053000 Polyvinyl alcohols, in primary forms 3,649,095
39241000 Tableware & kitchenware of plastics 498,642
39259000 Builders' ware of plastics, nes 462,226

Source: Chinese Customs

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Focus article by Al Greenwood

Additional reporting by Joseph Chang

(Thumbnail image source: Shutterstock)