On January 15, 2020, U.S. President Donald Trump signed what the administration is calling “Phase 1” of a trade deal with China. If you’re importing goods from China, this initial deal may offer you some relief from the U.S. tariffs on many Chinese imports that started in 2018.
That being said, many of the tariffs put in place by both the U.S. and the Chinese governments will remain. So if you’re currently doing business with China—or considering a new venture that revolves around Chinese imports—these costs will continue to affect your bottom line.
Below, we’ll give you a brief rundown of what’s changed and what will stay the same—for now. While the Trump administration has discussed a second phase to the deal, it’s unclear what additional changes might take place. At the end of this article, we’ll give you a few resources that will help you stay up to date on this evolving issue.
First, let’s review the major provisions of the Phase 1 trade deal with China.
#1: The Phase 1 Deal Cancels the Tariffs Originally Scheduled for December 15
On December 15, 2019, the U.S. government had planned to place a 15% tariff on a list of Chinese goods, originally called list 4B by the Office of the United States Trade Representative (USTR). The list included items such as:
- Electronics: Cell phones, laptops, small appliances, watches and clocks.
- Consumer products: Clothes, toys, blankets, baby items and camping gear.
- Raw materials, including chemicals like sucralose, eucalyptus oil and industrial chemicals.
However, before these tariffs took effect, President Trump announced progress on this trade deal and delayed its implementation.
With the official signing of the deal in January, these tariffs have been canceled, and importers will no longer have to pay the 15% tariff on these items.
#2: The Tariff Increase to 30% Will Not Happen
The administration had also planned to raise tariffs on products from USTR Lists 1, 2 and 3 to 30% from 25%. However, this increase was delayed in October 2019. With the new Phase 1 agreement underway, this increase is now canceled.
That being said, Chinese imports on Lists 1, 2 and 3 will still be subject to a 25% tariff. To discover exactly which products the tariff effects, you can view and search these lists on the USTR website. If you’re researching specific products that you might be considering for your supply chain, have the Harmonized Tariff Schedule (HTS) code handy to make your search easier.
#3: The China Trade Deal Tariff Rate on $112B Worth of Products Will Drop by 50%
As part of the new Phase 1 agreement, products on List 4 (formerly known as List 4A) will drop to 7.5% from 15%. The reduced tariff applies to items such as:
- Food products, such as tea, coffee, wine, brandy, meats, dairy products, produce and pantry items like olive oil and maple syrup.
- Baby items like diapers, clothes and baby formula.
- Clothing and accessories like pants, skirts, underwear, pajamas, dresses, coats and gloves.
- Home décor such as blinds, shutters, wallpaper and bed linens.
- Books, textbooks and dictionaries.
- Musical instruments, including grand pianos.
- Office supplies like pens, pencils and printed calendars
If you’ve been importing any of these items—or considering their import—this drop in the tariff rate is good news for you.
#4: China Makes Several Promises to Make Doing Business Simpler
In addition to pledging to increase purchases of U.S. goods, China also made two key promises that may make doing business in China easier for American companies.
- The country promised to provide stronger protection for intellectual property, which has been a challenge in the past.
- The country also promised to remove pressure on companies to reveal their technology as a requirement for doing business in China, an issue that has concerned American companies in the past.
Resources to Stay Up to Date on the Latest Tariffs and Regulations
Even though the Phase 1 agreement represents a step forward in what has been called a “trade war” with China, many tariffs will still stay in place on both sides. Additionally, because this has been an evolving issue, it’s important to get the most up to date information to ensure that you understand the tariffs in place during your next transaction.
Here’s what we suggest:
- Talk to your freight forwarder or customs broker. They can help you research potential tariffs—and give you up-to-the-minute information so you can feel confident that you have the accurate answers you need. Make sure you have the Harmonized Tariff Schedule (HTS) code handy for your imports to make your research easy.
- Use the Office of the United States Trade Representative website. The site has the entire Phase 1 China trade agreement available for review. Additionally, you can use their search function to see the current tariffs associated with the HTS codes for any items you’re importing.
Finally, if you’d like some assistance with the logistics around importing to China, our international experts can make it simple. We can help with researching tariffs, arranging for transportation and delivery, preparing customs paperwork and more. Just get in touch with us for a complimentary consultation.
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