Firms see shielding on China levies end

Tariff exclusions expired with ’20

WASHINGTON — U.S. companies are facing the prospect of higher taxes on some of the products they import from China, as the tariff exclusions that had shielded many businesses from President Donald Trump’s trade war were to expire at midnight Thursday.

Trump began placing tariffs on more than $360 billion of Chinese goods in 2018, prompting thousands of companies to ask the administration for temporary waivers excluding them from the levies. Companies that met certain requirements were given a pass on paying the taxes, which range from 7.5% to 25%. Those included firms that import electric motors, microscopes, salad spinners, thermostats, breast pumps, ball bearings, fork lifts and other products.

But the bulk of the exclusions, which could amount to billions in revenue for businesses based in the United States, were to automatically expire at midnight Thursday. After that, many companies will have to again pay a tax to the government to import a variety of goods from China, including textiles, industrial components and other assorted products.

The Trump administration could still extend the exclusions but has not given

any indication of whether it will, leaving many companies in limbo. The Office of the U.S. Trade Representative did not respond to requests for comment about the exclusions.

The United States has announced some extensions — on Dec. 23, the trade representative announced that it would extend exclusions until March 31 for a small category of medical care products, including hand sanitizer, masks and medical devices, to help with the battle against the coronavirus pandemic.

But Ben Bidwell, the director of U.S. customs at the freight forwarder C.H. Robinson, who has been helping clients apply for exclusions, said “the large majority” of those that had been granted would expire at the end of the year, leaving importers with either an additional 7.5% or 25% tariff, depending on their product.

The U.S. trade representative had been “rather silent about any type of extension,” Bidwell said.

Lawmakers have lobbied the administration to extend the waivers. On Dec. 11, more than 70 members of Congress, including Rep. Jackie Walorski, R-Ind., and Ron Kind, D-Wis., sent a letter urging Robert Lighthizer, the U.S. trade representative, to extend all of the active exclusions to help businesses that have been hurt by the pandemic.

“Our economy remains in a fragile state due to the ongoing [covid-19] pandemic,” the letter states. “Extending these exclusions will provide needed certainty for employers and help save jobs.”

Trump has wielded tariffs to protect some U.S. industries from foreign competition and encourage others to move their supply chains from China. The tariffs have partly accomplished those goals, although most companies have moved operations to other low-cost countries like Vietnam or Mexico, rather than the United States.

But most economists say those gains have come at a high price and hurt the U.S. manufacturing sector overall by greatly increasing the cost of imported components and making U.S. manufacturers less competitive with other companies abroad.

Some companies say the exclusions process has been particularly unfair. While large companies have invested large sums in hiring Washington law firms to lobby the administration and apply for exemptions, some small companies say they have lacked the resources to apply for and win exclusions.

“Allowing these exclusions to expire — especially because the facts supporting their original determination remain unchanged — shows how arbitrary and capricious this process has been,” said Stephen Lamar, the chief executive of the American Apparel & Footwear Association, which represents makers of shoes and clothing.

“These companies could ill afford a tax on their imported inputs and U.S. workers when they originally applied for these exclusions, and they certainly can’t afford one now,” he said.

Two other long-running programs that have exempted imported products from tariffs were also to expire Thursday.

The Miscellaneous Tariff Bill, which temporarily suspends tariffs on some imported goods, including inputs used by U.S. manufacturers, and the Generalized System of Preferences, which provides thousands of products from developing countries duty-free access to the U.S. market, expired at the end of the year. There has been little momentum in Congress to resurrect the programs, as popular opinion has gradually turned against initiatives that offer foreign companies cheaper access to the U.S. market as a way to promote freer trade.

Company executives are unsure whether the incoming administration will use a different tactic, but President-elect Joe Biden appears unlikely to make significant changes anytime soon.

In an interview in December with The New York Times, Biden said that he would conduct a full review of the United States’ trade relationship with China and consult with allies in Asia and Europe to develop a coherent strategy before making changes.

“I’m not going to make any immediate moves, and the same applies to the tariffs,” he said.

French wine exporters warned Thursday that they’ll take a billion-euro hit in 2021 from the latest ratcheting up of punitive tariffs between the United States and Europe in a trade fight over aircraft subsidies.

The U.S. government announced Wednesday the imposition of additional tariffs on French and German wines and brandies, as well as aircraft manufacturing parts. They are the latest round of tit-for-tat tariffs in a yearslong conflict over subsidies to plane-makers Boeing and Airbus.

Airbus slammed the U.S. Trade Representative decision as “counterproductive in every way,” saying it would hurt U.S. manufacturing, workers and consumers, and “will not contribute to a climate of trust to create a negotiated solution.” In an email, it called for the EU to respond appropriately.

Airbus and Boeing have been hit hard by the pandemic and its impact on air travel. A recent surge in covid-19 cases in Europe and the U.S. has also increased the likelihood of a double-dip recession in the EU and a slowing recovery in the U.S. economy. That could prolong the pain for both aircraft makers and raise the economic stakes for their home countries.

The French Federation of Wine and Spirits Exporters on Thursday decried the U.S. measures as “a sledgehammer blow” and estimated they could cost the sector more than $1.2 billion.