US importers set for ‘dramatic impact’ from new China tariffs

By Roger Hailey Sep 30 2019 / Llyods’s loading List

New analysis from freight forwarder Flexport indicates that businesses which ‘survived’ the duty increases in 2018 have not escaped the worst of the dispute

As trade tensions continue between the United States and China, new data from freight forwarder Flexport indicates that businesses which “survived” 2018 may not have escaped the worst of the dispute, facing steep increases in import costs from the latest waves of import tariffs.

Analysis by Flexport’s chief economist, Phil Levy, states that while the conflict may appear to have dragged on, the updated data shows “a compressed timeline with dramatic impact” from the the latest waves of import tariffs since mid-2019.

Describing the “sudden impact” of tariffs on US Imports from China, Levy states in a blog: “The picture is becoming more worrisome. Businesses that survived 2018 and thought they were in the clear might actually not be out of the woods. Understanding how the analytics are trending can help inform business planning and forecasting as the tariff wars rage on.”

The snapshot depicts Flexport monthly data as the tariffs have rolled out on China trade. Levy continues: “Drilling down into a subset of Flexport shipments, we examined only those categories for which positive tariffs were paid for at least one period. While the sample is not necessarily representative of overall US imports from China, it does cover a broad range of categories. Shipment volumes in each category varied across the time period.”

Levy says that the snapshot presents tariffs paid as a fraction of product value for a subset of goods shipped with Flexport from China to the US, from January 2016 through August 2019.

He adds: “While there has been aggressive talk about US-China trade for quite some time, it was only about a year ago that tariffs really started to jump. One persistent economic question has been why we have not seen more of a trade war impact on US economic performance? 

“Despite the long roots of the commercial conflict with China and the prominence of the question in the 2016 campaign, the bulk of the tariffs really hit later.” 

The graph includes data right up until the eve of the latest tranche of tariffs, List 4a, which went into effect on September 1. Those 15% tariffs cover roughly $112bn of goods – a “significant broadening” on what Flexport has seen so far. 

Flexport offers the following advice to businesses as they make supply chain decisions and plan their shipments “There are likely more tariffs to come, which will make this curve even steeper. Unless negotiations succeed, tariffs hikes are scheduled for October 15 and then December 15.

“When all the new tariffs are in place, they will cover almost all imports from China; some at the 15% level and some at the 30% level. This will make it substantially harder to change product categories to avoid tariffs – a practice in which some companies have sought to modify their products to qualify for a lower-tariff category,” he notes.

“So far, there is little sign of tariffs being applied as prolifically to other countries in the region. This means that a product’s official country of origin – not necessarily where most of the work is done – can make a big difference in tariff obligations. It is worth consulting a customs professional to check the rules, as they vary by product.”‘dramatic-impact’-from-new-China-tariffs/75097.htm#.XZ1X8vZuI2x

Do you need Help? Get in touch.

Feel free to contact TNETS for information on any matter related to customs or trade compliance. We're here to help!