china tarriffs on lcd monitors brands

Approximately 90 percent of all LCD modules are manufactured in mainland China. The remaining 10 percent are manufactured primarily between Japan and Taiwan, and some in Korea. China’s clear stronghold in manufacturing, coupled with its large volume of imports to the U.S., mean these tariffs will definitely impact the industry.

The US government said the tariffs where created in response to China’s Unfair Trade Practices. Specifically, the Section 301 investigation by the USTR revealed:

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 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.

Unfortunately, while the USTR works to rectify inequities in these unfair practices, many American manufacturers will have to pay higher prices for their components. That works its way up the supply chain and can ultimately lead to higher prices for American consumers.

The USITC (Office of Tariff Affairs and Trade Agreements) is responsible for publishing the Harmonized Tariff Schedule of the United States Annotated (HTSA). The HTSA provides the applicable tariff rates and statistical categories for all merchandise imported into the United States; it is based on the international Harmonized System, the global system of nomenclature that is used to describe most world trade in goods. Although the USITC publishes and maintains the HTSA in its various forms, Customs and Border Protection is the only agency that can provide legally binding advice or rulings on classification of imports.

Many people are asking about using alternate HTC codes with lower burden implications. Unfortunately, these codes are abundant and complicated. There should be exactly one code that properly categorizes your product.

When a display is designed and built for a single application, it may be more appropriate to use a harmonized tariff code for the end-product instead of the display component. An LCD in a cellphone is a good example of this.

A popular way to do this is to reevaluate your current HTC codes and make sure they’re correct. This can be done with in-house council or the use of a consultant specializing in this area of the government. Ultimately, however, you need get a ruling from the government to be certain you are using the correct code.

Some companies are searching for key suppliers outside of the China region and working towards qualifications of those factories. Others are exploring having key components of the purchased assembly outsourced outside of China so it still satisfies the correct definition of Country of Origin. Again, violating these definitions can lead to costly fines and penalties.

Otherwise, without such Approval, even if the goods have arrived at the China Customs, they will not be cleared normally, and the goods will be detained in the port till get such approval, or even be returned, causing you huge losses.

All the information, data and documents are provided by ETCN only for your reference. ETCN promises to collect and edit them in due care but shall not be liable for their correction and accuracy. In case of any discrepancy, official versions and interpretations shall prevail.

Two days after Independence Day 2018, President Donald Trump’s aggressive new tariffs went into effect, imposing anextra 25% taxon imported Chinese goods. This affected over $50 billion worth of “industrially significant technologies” used by U.S. electronics manufacturers and their buyers.

Many industry groups held their tongues in hopes that the president would successfully force Beijing to play fairer with intellectual property rights and more. Until early May 2019, that seemed likely, as Trump repeatedly claimed a historic trade deal with China was imminent.

So, why are electronics makers suddenly looking at the possibility of tariffs on virtually everything? And where will the tariffs on electronics from China end up as we approach 2020?

In mid-June, 7 days of hearings were held before the Office of the U.S. Trade Representative on the president"s proposal to expand tariffs to an additional $300 billion in imports from China. These are pretty much the only imports from China -- from any industry -- that remain tariff-free.

The USTR has gotten more than 1,000s of written comments on the plan, almost all of them condemning the tariff proposal. They say the additional measures would:

Trump"s recent threats toimpose tariffs on Mexican imports in a dispute over border security, coupled with fading prospects for a compromise in the China trade war, has resulted in increasingly loud opposition.

On September 1, 2019 tariffs were instituted on roughly $110 billion in Chinese imports. This change hit a variety of markets, including apparel, footwear, home textiles, and some technology products -- including the Apple Watch.

Tariffs of 25% imposed previously on $250 billion worth of Chinese goods are set to rise to 30%. That was initially going to happen Oct. 1, but in September the president announced a delay to Oct. 15.

So, what does this mean? All suppliers should be expected to pass through current and any new tariffs. In 2018 this meant raising costs of all components listed in the Section 301 tariff act, including:

Since many suppliers produce components in multiple countries, you may not know until shipping whether the “country of origin” for your components will be China. This means that when placing orders, ECM buyersdo not always know whether they’ll be subject to additional taxation.

Additionally, there are current talks of additional 15% tariffs being placed on about $160 billion in Chinese goods, mostly electronics including laptops and cellphones, in December of 2019.

The only way around the tariff is to ensure that goods were not reshipped into the U.S. from China via a third-party country. Most electronics contract manufacturers have provided OEMs with a surcharge, with the position that the tariffs were likely temporary. Others, however, have been charging at cost. Now, who knows how they"ll adjust charges?

A number of industry associations -- like the International Distribution of Electronics Association -- and individual businesses -- like Matric Group -- have made efforts to have component-level parts removed from the list. Still, the best thing to do in the meantime is to stay informed and know what to expect.

These are all consumer electronics tariffs. There have been rare exceptions made for general electronics, and we"ll wait to hear more about tariffs at the component level. The tariff increase"s scope has yet to be finalized, if angry U.S. CEOs have anything to say about it.

A 25% tariff on electronic components doesn"t mean a direct 25% increase in the final cost ofyour product.Some estimatesput the price hike in the 3% range for a typical low-to-mid-volume production, but that could increase if tariffs begin affecting active components like integrated circuits.

Even with the lack of consumer electronics on the currently enforced tariffs list (for now), higher prices in the supply chain have led in some cases to higher prices of finished goods for consumers.

Worried about the impact of tariffs on U.S. manufacturers? You may want help with component life cycle management? An electronics manufacturer that offers full aftermarket services can take that headache off your hands:

May 10thsees the US-China trade dispute escalating yet again as the US continues to hike tariffs on US$200 billion worth of Chinese imports, going from 10% to 25%.TrendForcepoints out that TVs , monitors, notebooks and other display products were not among the US$250 billion worth of goods hit by the 25% tariffs, thus the current impact on panels and the display industry remains to be fairly limited.

Yet tensions amid the US-China trade war has intensified. China has swiftly responded in retaliation, imposing 5%-25% punitive tariffs of its own on US$60 billion worth of goods on May 13th, Taipei Time. Likewise, the US has released its 4thlist of tariffs, including US$325 billion worth of China exports among the items to suffer 25% tariffs. Notebooks, which make up a sizeable proportion of imports in revenue, are especially deserving of close attention.

The significance of notebook PCs lies in 3 areas, and one should note that not only are the US and China both harmed by the high tariffs, but Taiwan is also caught up in the storm. First of all, nearly 90% of notebook PCs imported to the US are assembled in China, with Chongqing as its main industrial city for these products. Lacking other production bases of similar scale with highly integrated supply chains for flexible procurement, China will suffer a terrible hit in exports should punitive tariffs begin to fly.

Secondly, the North American notebook PC market is highly reliant on domestic brands in the US. According to TrendForce"s global shipment statistics for notebook PC brands 2018, American brands HP, Dell and Apple"s market shares combined comprised up to 66% of the entire North American market. Looking at it from another angle, shipments for the North American market took up 40~50% of total shipments and formed the main source of business for each of the three giants. If tariffs are imposed on notebook PCs, American brands will begin to lose competitive power due to elevated costs from tariffs, impacting both business and profits. If the tariffs reflect themselves in the end prices for notebook PCs, then there will be good reason to worry whether the North American market, which comprises up to a third of global notebook PC shipments,will suffer from a stifled sales momentum. Should that come to pass, it shall be mayday for both American notebook PC brands and the global notebook market.

Lastly, Taiwan"s suppliers have long accumulated competitive power in and concentrated on notebook PC manufacturing. The three aforementioned American brands all depend 90% on Taiwan"s suppliers. If punitive tariffs become unavoidable, Quanta, Compal and Wistron may become another center of impact in this disaster . Some notebook PC ODMs have expanded their production capacities in Vietnam, Taiwan and other locations outside China since 2018 in an attempt to minimize the potential impacts from tariffs. Although the change in places of production may circumvent the tariffs, notebook PC supply chains have long been situated in China. Shipping the relevant upstream components to new plants overseas of China will incur additional fees and time costs, thus leading to an inevitable overall increase in cost despite the tariff work-around.

In TV markets, having TVs made in Mexico and shipped to America for sale have always been the business model for years under considerations of tariff-related incentives and logistic costs. Taking the current top four TV brands by market share for example, we see that Samsung and LG have enormous production capacities in Mexico, allowing the two Korean manufacturers to circumvent the towering tariffs on China imports with ease, thanks to the additional resources at hand.

In contrast, Chinese brand TCL, catapulted by sharp price strategies, and Vizio are still highly reliant on China manufacturers for production. Although TCL possesses some capacity in Mexico, it is only enough for 50% of US demand. That is to say, once TVs are included in the list of products to suffer punitive tariffs, a reshuffling of brands by brand strength and market shares shall ensue.

Washington, DC – As part of the United States’ continuing response to China’s theft of American intellectual property and forced transfer of American technology, the Office of the United States Trade Representative (USTR) today released a list of approximately $200 billion worth of Chinese imports that will be subject to additional tariffs.  In accordance with the direction of President Trump, the additional tariffs will be effective starting September 24, 2018, and initially will be in the amount of 10 percent.  Starting January 1, 2019, the level of the additional tariffs will increase to 25 percent.

The list contains 5,745 full or partial lines of the original 6,031 tariff lines that were on a proposed list of Chinese imports announced on July 10, 2018.  Changes to the proposed list were made after USTR and the interagency Section 301 Committee sought and received comments over a six-week period and testimony during a six-day public hearing in August.  USTR engaged in a thorough process to rigorously examine the comments and testimony and, as a result, determined to fully or partially remove 297 tariff lines from the original proposed list.  Included among the products removed from the proposed list are certain consumer electronics products such as smart watches and Bluetooth devices; certain chemical inputs for manufactured goods, textiles and agriculture; certain health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens.

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 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.

After separate notice and comment proceedings, in June and August USTR released two lists of Chinese imports, with a combined annual trade value of approximately $50 billion, with the goal of obtaining the elimination of China’s harmful acts, policies and practices.  Unfortunately, China has been unwilling to change its policies involving the unfair acquisition of U.S. technology and intellectual property.  Instead, China responded to the United States’ tariff action by taking further steps to harm U.S. workers and businesses.  In these circumstances, the President has directed the U.S. Trade Representative to increase the level of trade covered by the additional duties in order to obtain elimination of China’s unfair policies.  The Administration will continue to encourage China to allow for fair trade with the United States.

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WASHINGTON (Reuters) - U.S. President Donald Trump on Tuesday backed off his Sept. 1 deadline for 10% tariffs on remaining Chinese imports, delaying duties on cellphones, laptops and other consumer goods, in the hopes of blunting their impact on U.S. holiday sales.

The delay which, affects about half of the $300 billion target list of Chinese goods - along with news of renewed trade discussions between U.S. and Chinese officials - sent stocks sharply higher and drew cautious relief from retailers and technology groups.

Trump’s 10% tariffs will be effective from Dec. 15 for thousands of products including clothing and footwear, possibly buttressing the holiday selling season from some of the fallout from the protracted trade spat between the world’s two largest economies.

“We’re doing this for Christmas season, just in case some of the tariffs would have an impact on U.S. customers,” Trump told reporters in New Jersey. “Just in case they might have an impact on people, what we’ve done is we’ve delayed it so that they won’t be relevant to the Christmas shopping season.”

The U.S. Trade Representative’s Office announced the decision just minutes after China’s Ministry of Commerce said Vice Premier Liu He conducted a phone call with U.S. trade officials.

Liu agreed with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to speak again by phone within the next two weeks, the ministry said.

The delay in tariffs on a substantial portion of a $300 billion list of remaining Chinese imports sent U.S. stocks surging, after steep losses in the past week, with the Standard & Poor"s 500up 1.5% and the Nasdaq Compositegaining nearly 2%.

Shares of market bellwether Apple Incsoared 4.2% on news that its core iPhone, tablet and laptop computer products would be spared from tariffs for the time being.

But the Trump administration still plans to impose 10% tariffs on thousands of Chinese food, clothing and other consumer electronics products beginning Sept. 1.

Among these are Chinese-made smartwatches from Apple and Fitbit, smart speakers from Amazon.com Inc, Googleand Apple, and Bluetooth headphones and other devices, a category estimated at $17.9 billion last year by the Consumer Technology Association.

Flat screen televisions from China, a category worth $4.5 billion, also will face 10% tariffs on Sept. 1 after being spared from Trump’s first round of tariffs more than a year ago.

A trade group representative said USTR informed them that it opted to delay tariffs on items where China supplies more than 75 percent of total U.S. imports. Product categories where China supplies less than 75 percent will still face tariffs on Sept. 1, the representative said, speaking on condition of anonymity because the information was not publicly released.

Based on a Reuters analysis, the delay could extend to around half of the $300 billion list of remaining Chinese imports. Chinese imports subject to the tariffs on Dec. 15 totaled about $156 billion last year, according U.S. Census bureau data.FILE PHOTO: U.S. President Donald Trump meets with China"s President Xi Jinping at the start of their bilateral meeting at the G20 leaders summit in Osaka, Japan, June 29, 2019. REUTERS/Kevin Lamarque/File Photo

While most retailers would have stocked their holiday merchandise before the September deadline, some might have faced the tariffs for fill-in orders late in the holiday shopping season.

Still, the Retail Industry Leaders Association said “removing some products from the list and delaying additional 10% tariffs on other products, such as toys, consumer electronics, apparel and footwear, until Dec. 15 is welcome news as it will mitigate some pain for consumers through the holiday season.”

The Consumer Technology Association applauded the delay on some items, but added: “Next month, we’ll begin to pay more for some of our favorite tech devices – including TVs, smart speakers and desktop computers. The administration should permanently remove these harmful tariffs and find another way to hold China accountable for its unfair trading practices.”

The 21-page-list of products that will not get hit with tariffs until December also includes baby monitors and strollers, microwaves, instant print cameras, doorbells, high chairs, musical instruments, ketchup dispensers, baby diapers, fireworks, sleeping bags, nativity scenes, fishing reels, paint rollers and food products.

A separate group of products will be removed from the tariff list altogether, the USTR said, “based on health, safety, national security and other factors.” It did not immediately identify these items.

Trump announced the Sept. 1 tariffs less than two weeks ago, blaming China for not following through on promises to buy more American agricultural products during talks in Shanghai at the end of July. That move was met with a drop in China’s yuan currency a few days later, prompting the Trump administration to declare Beijing a currency manipulator and sending markets tumbling for several days last week.

In a sign the administration may be expecting something in return, Trump tweeted on Tuesday: “As usual, China said they were going to be buying ‘big’ from our great American Farmers. So far they have not done what they said. Maybe this will be different!” Trump tweeted.

Trump’s tariff delay comes amid growing concerns about a global economic slowdown. Goldman Sachs said on Sunday fears of the U.S.-China trade war leading to a recession were increasing and Goldman no longer expects a trade deal between the two countries before the 2020 U.S. presidential election.

Trump has also personally criticized Chinese President Xi Jinping for failing to do more to stem sales of the synthetic opioid fentanyl amid an opioid overdosing crisis in the United States.

Reporting by David Shepardson, David Lawder, Makini Brice and Susan Heavey in Washington; additional reporting by Jeff Mason in Morristown, New Jersey; Writing by David Lawder; editing by Tim Ahmann, Marguerita Choy and Cynthia Osterman

WASHINGTON, July 19 (Reuters) - Importers of technology products from China paid over $32 billion worth of tariffs imposed by President Donald Trump between mid-2018 to the end of 2021, a new trade group report showed on Tuesday as the Biden administration continues to deliberate over whether to remove some duties.

The Consumer Technology Association said in the report that the tech industry has reduced its dependence on China in the wake of the tariffs, but this has been offset by increased imports from Vietnam, Taiwan, South Korea, Malaysia and other countries.

Roughly half of the $32 billion in tariffs were paid on Chinese-produced computers and electronic products, CTA said. Total "Section 301" tariffs paid on Chinese goods through July 13 totaled $145.43 billion, according to Customs and Border Protection data.

The report comes as the Biden administration is trying to determine whether to remove some of the tariffs as a way to provide American consumers relief from high inflation, which remained low during the first two years that the tariffs were imposed.

Ed Brzytwa, CTA"s vice president of international trade, said in a statement that the tariffs were hurting U.S. businesses, not solving China trade challenges.

"With rising prices across all sectors of our economy, removing tariffs would mitigate rampant and harmful inflation and lower costs for Americans," he said.

CTA"s review of import trends since the tariffs were first imposed in phases in mid-2018 show that imports of Chinese tech goods hit by Section 301 tariffs fell by 39% over the next three and a half years, while those not affected grew by 35%.

China’s share of U.S. imports of tech products hit by the tariffs roughly halved to 17% in 2021 from 32% in 2017, CTA said. About half of the $32 billion in tariffs were for computers and electronics products.

The group said there was no such shift tech products unaffected by tariffs, with China accounting for 84% of U.S. imports in these categories in both 2017 and 2021.

But some imports of Chinese produced consumer tech goods were higher in 2021 than 2017 despite the tariffs, suggesting that the motivation among some companies to "leave China" had abated. Among these were digital cameras, certain cooking appliances and vacuum cleaners including robot vacuums.

Aug. 15 – China may lift import duties on LCD panels in order to motivate domestic LCD panel manufacturers and attract more foreign direct investors to build production lines in the country, according to a report by Right Site Asia, an online Asian industrial information platform. The tariff rate may jump to 8 percent from the current 5 percent.

China’s Ministry of Industry and Information Technology announced fiscal and policy support for domestic panel production back in 2008 in a bet to reduce the country’s heavy reliance on LCD panel imports from Japan and Taiwan. If the government approves the tariff hike this time, a number of traditional LCD exporters to China will likely lose competitiveness in prices.

However, on the other hand, the tariff increase is expected to largely encourage those enterprises that already have their own production lines in China. Both China’s BOE Technology Group and China Star Optoelectronics Technology have put their fresh 8.5-Generation LCD panel plants into production recently, leading the whole industry to step into a new era where the country’s demand for LCD panels larger than 32 inches is no longer completely dependent on imports.

Bai Weimin, vice chairman of China Video Industry Association, recently expressed his confidence in the future of Chinese LCD panel companies after a major import order worth US$5.5 billion was struck between mainland color TV manufacturers and Taiwanese LCD panel producers. Bai said he believes such orders will be reduced in the future because Chinese enterprises will start to produce more panels by themselves.

It is also hoped that increasing levels of foreign direct investment (FDI) will be introduced to the industry. In fact, several Asian LCD panel giants are already moving. The South Korea-based Samsung Electronics’ 7.5G panel plant in Suzhou Industrial Park (SIL) – the company’s joint venture with the SIL and the Chinese consumer electronics maker TCL – has kicked off construction in May this year, and is expected to boast a monthly capacity of 100,000 glass substrates when it enters mass production in 2013. Another South Korean company, LG Display, also plans to begin construction on an 8.5G plant in Guangzhou at the end of August, while the Taiwan-based AUO is investing in a joint venture to build an 8.5G plant in Kunshan, which will be put into mass production in 2013.

Before China, the European Union has set up the example of using a tariff strategy to attract more FDI into the region’s panel industry. The region’s import duties on LCD panels – which used to be as high as 14 percent – worked effectively to make a large number of LCD monitor suppliers relocate their production lines to the East European countries, but it also incurred trade disputes. The EU had to agree to void LCD monitor tariffs earlier this year, following a trade complaint filed by Taiwan.

SEOUL/TOKYO, Sept 23 (Reuters) - A growing number of Asian manufacturers of products ranging from memory chips to machines tools are moving to shift production from China to other factories in the region in the wake of U.S. President Donald Trump’s tariffs on Chinese imports.

Companies including SK Hynix of South Korea and Mitsubishi Electric, Toshiba Machine Co. and Komatsu of Japan began plotting production moves since July, when the first tariffs hit, and the shifts are now under way, company representatives and others with knowledge of the plans told Reuters. Others, such as Taiwanese computer-maker Compal Electronics and South Korea’s LG Electronics , are making contingency plans in case the trade war continues or deepens.

The quick reactions to the U.S. tariffs are possible because many large manufacturers have facilities in multiple countries and can move at least small amounts of production without building new factories. Some governments, notably in Taiwan and Thailand, are actively encouraging companies to move work from China.

The United States imposed 25 percent duties covering $50 billion of Chinese-made goods in July, and a second round of 10 percent tariffs covering another $200 billion of Chinese exports will come into effect next week. The latter rate will jump to 25 percent at the end of the year, and Trump has threatened a third round of tariffs on $267 billion of goods, which would bring all of China’s exports to the United States into the tariff regime.

The tariffs threaten China’s status as a low-cost production base that, along with the appeal of the fast-growing China market, drew many companies to build factories and supply chains in the country over the past several decades.

At SK Hynix, which makes computer memory chips, work is under way to move production of certain chip modules back to South Korea from China. Like its U.S. rival Micron Technology, which is also moving some memory-chip work from China to other Asian locations, SK Hynix does some of its packaging and testing of chips in China, with the chips themselves mostly made elsewhere.

“There are a few DRAM module products made in China that are exported to the United States,” said a source with direct knowledge of the situation, referring to widely used dynamic random-access memory chips. “SK Hynix is planning on bringing those DRAM module products to South Korea to avoid the tariff hit.”

Most of SK Hynix’s production won’t be affected, the source added, since China’s dominance in computer and smartphone manufacturing makes it by far the largest market for DRAM chips.

The machines are used for making plastic components such as automotive bumpers. “We’ve decided to shift part of our production from China because the impact of the tariffs is significant,” a spokesman said.

Mitsubishi Electric, meanwhile, says it is in the process of shifting production of U.S.-bound machine tools used for metal processing from its manufacturing base in Dalian, in northeastern China, to a Japanese plant in Nagoya.

In Taiwan, an executive at notebook PC maker Compal, who declined to be named, said the trade war’s impact had been limited so far, but the company was studying its options.

“We can also use facilities in Vietnam, Mexico and Brazil as alternatives,” the person said. “It won’t be easy because our majority production is in China; no other country can replace that at this moment.”

Smaller companies are exploring their options too. South Korean medical equipment manufacturer IM Healthcare, which makes products including air purifiers, is studying a move to Vietnam or South Korea if the trade conflict intensifies, a source with direct knowledge of the matter said.

Some Asian governments hope for an economic and strategic boost from the U.S.-China conflict. In Taiwan, the government is actively encouraging companies to move production out of China, pledging last month to speed up its existing “Southbound Policy” to reduce economic reliance on China by encouraging companies to move supply chains to Southeast Asia.

Taiwan economics ministry official William Liu told Reuters that the trade war was “a challenge and an opportunity” for the self-ruled island. Taiwan depends on China as an export market, he noted, but at the same time could see a boost in jobs from companies moving operations back home.

Thailand also hopes to benefit from the “flow of technology and investment leaving China during the trade war”, said Kanit Sangsubhan, Secretary-General of the Eastern Economic Corridor (EEC) Office of Thailand, which is coordinating a $45 billion project to attract investment into the country. The EEC last month took some 800 representatives of Chinese companies on a tour around the eastern industrial heartland, and the country’s Board of Investment has done seven roadshows in China this year to woo investors. (Reporting by Ju-min Park and Heekyong Yang in Seoul and Makiko Yamazaki in Tokyo; Additional reporting by Jess Macy Yu and Yimou Lee in Taipei, Patpicha Tanakasempipat in Bangkok, Sankalp Phartiyal in Mumbai and Fanny Potkin in Jakarta; Writing by Jonathan Weber; Editing by Alex Richardson)

WASHINGTON (Reuters) - The U.S. Trade Representative’s office said on Tuesday it has extended China tariff exclusions for a wide range of goods, including smart watches and certain medical masks, through the end of 2020, rather than renewing the previous one-year extensions.

The extension of only four months would likely maintain some leverage over China’s implementation of a Phase 1 trade deal, but would increase uncertainty for importers of products ranging from Bluetooth devices to upright pianos.

In a Federal Register notice here, USTR said the extensions applied to products excluded from "Section 301" tariffs imposed by President Donald Trump a year ago on a range of Chinese consumer goods amid tense trade negotiations between the world"s two largest economies. The tariffs on some $125 billion worth of goods were set at 15%, then lowered to 7.5% by the Phase 1 deal signed in January.

The products included a number of Bluetooth and wearable data-transmitting devices, such as those imported from China by Apple Inc, FitBit, Sonos and other technology companies.

Also on the list of extended exclusions were a number of face masks, respirators and other medical products, including stethoscope covers, cotton gauze sponges and blood pressure cuff sleeves. Products ranging from upright pianos to liquid crystal display modules and stainless steel watch cases also were excluded until year-end.

USTR had previously granted one-year exclusions from the tariffs. The Federal Register notice did not indicate a specific reason for extending the exclusions for only four months, but the Trump administration has threatened to raise tariffs should China fail to implement the Phase 1 agreement launched in February.

While U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He reaffirmed their commitment to the deal last week, China’s purchases of U.S. goods and services are well behind the pace needed to meet first year targets of a $77 billion increase over 2017 levels.

“The U.S. Trade Representative will take account of the cumulative effect of exclusions in considering the possible further extension of the exclusions covered by this notice, as well as possible extensions of exclusions of other products covered by the action in this investigation,” the agency said.

Washington, DC – As part of the United States’ continuing response to China’s theft of American intellectual property and forced transfer of American technology, the Office of the United States Trade Representative (USTR) today released a list of approximately $200 billion worth of Chinese imports that will be subject to additional tariffs.  In accordance with the direction of President Trump, the additional tariffs will be effective starting September 24, 2018, and initially will be in the amount of 10 percent.  Starting January 1, 2019, the level of the additional tariffs will increase to 25 percent.

The list contains 5,745 full or partial lines of the original 6,031 tariff lines that were on a proposed list of Chinese imports announced on July 10, 2018.  Changes to the proposed list were made after USTR and the interagency Section 301 Committee sought and received comments over a six-week period and testimony during a six-day public hearing in August.  USTR engaged in a thorough process to rigorously examine the comments and testimony and, as a result, determined to fully or partially remove 297 tariff lines from the original proposed list.  Included among the products removed from the proposed list are certain consumer electronics products such as smart watches and Bluetooth devices; certain chemical inputs for manufactured goods, textiles and agriculture; certain health and safety products such as bicycle helmets, and child safety furniture such as car seats and playpens.

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 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.

After separate notice and comment proceedings, in June and August USTR released two lists of Chinese imports, with a combined annual trade value of approximately $50 billion, with the goal of obtaining the elimination of China’s harmful acts, policies and practices.  Unfortunately, China has been unwilling to change its policies involving the unfair acquisition of U.S. technology and intellectual property.  Instead, China responded to the United States’ tariff action by taking further steps to harm U.S. workers and businesses.  In these circumstances, the President has directed the U.S. Trade Representative to increase the level of trade covered by the additional duties in order to obtain elimination of China’s unfair policies.  The Administration will continue to encourage China to allow for fair trade with the United States.

Washington, DC – The Office of the United States Trade Representative (USTR) todayreleased a list of products imported from China that will be subject to additional tariffs as part of the U.S. response to China’s unfair trade practices related to the forced transfer of American technology and intellectual property.

“We must take strong defensive actions to protect America’s leadership in technology and innovation against the unprecedented threat posed by China’s theft of our intellectual property, the forced transfer of American technology, and its cyber attacks on our computer networks,” said Ambassador Robert Lighthizer.  “China’s government is aggressively working to undermine America’s high-tech industries and our economic leadership through unfair trade practices and industrial policies like ‘Made in China 2025.’  Technology and innovation are America’s greatest economic assets and President Trump rightfully recognizes that if we want our country to have a prosperous future, we must take a stand now to uphold fair trade and protect American competitiveness.”

The list of products issued today covers 1,102 separate U.S. tariff lines valued at approximately $50 billion in 2018 trade values.  This list was compiled based on extensive interagency analysis and a thorough examination of comments and testimony from interested parties.  It generally focuses on products from industrial sectors that contribute to or benefit from the “Made in China 2025” industrial policy, which include industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles.  The list does not include goods commonly purchased by American consumers such as cellular telephones or televisions.

USTR recognizes that some U.S. companies may have an interest in importing items from China that are covered by the additional duties. Accordingly, USTR will soon provide an opportunity for the public to request the exclusion of particular products from the additional duties subject to this action.  USTR will issue a notice in the Federal Register with details regarding this process within the next few weeks.

These acts, policies and practices of China include those that coerce American companies into transferring their technology and intellectual property to domestic Chinese enterprises.  They bolster China’s stated intention of seizing economic dominance of certain advanced technology sectors as set forth in its industrial plans, such as “Made in China 2025.”  (See USTR Section 301 Report

Interested persons filed approximately 3,200 written submissions.  In addition, USTR and the Section 301 Committee convened a three-day public hearing from May 15-17, 2018, during which 121 witnesses provided testimony and responded to questions. The public submissions and a transcript of the hearing are available on

Innolux Corp (群創), the nation’s biggest LCD panelmaker, yesterday urged the government to step up efforts to eliminate import tariffs on local LCD products in upcoming trade talks with China to help local companies save businesses.

Innolux’s statement came as trade in goods talks between Taiwan and China are entering the final stages. The latest round of trade talks is set to take place in the middle of this month in Taipei to resolve disagreements over further trade liberalization and tariff reductions.

China resisted lowering tariffs on flat panels from Taiwan after its demands to open local the agricultural sector were rejected during talks last month.

“The government should tough its position and beef up its efforts in talks with China to bring down the import tariffs on Taiwanese panelmakers to zero,” Innolux president Wang Jyh-chau (王志超) said in a company statement released yesterday.

It is crucial for Taiwanese LCD panel manufacturers to stay afloat by safeguarding their key role in supplying flat panels to Chinese TV brands because Taiwan’s LCD industry is bracing for a severe downturn, Wang said.

“Without the government’s help, Taiwan’s flat panel supply chain will be replaced by South Korean rivals,” Wang said. “South Korean panelmakers are nibbling local companies’ market shares in China because they are free of tax burdens.”

South Korean firms LG Display Co and Samsung Electronics Co are not required to pay any tariffs because they started operating Chinese factories two years ago, while Taiwanese companies lack facilities in China, Wang said.

Currently, China levies tariffs of between 5 and 8 percent on LCD panels made by Taiwanese companies. Innolux and most of its local peers, including AU Optronics Corp (友達光電), ship a large proportion of their flat panels to China.

Furthermore, it “will not be sufficient for Taiwan to get the same terms with South Korea in trade talks with China,” if Taiwan wanted to secure its Chinese customers, Wang said.

The Beijing-Seoul free trade agreement will allow South Korean flat panelmakers to enjoy zero import tariffs on LCD panels shipped to China after the agreement enters the 10th year.

In China, and worldwide, Taiwanese companies primarily face competitors from LG Display and Samsung, rather than Chinese manufacturers, which still lag far behind Taiwanese companies in terms of technology and operation efficiency, according to IHS Technology.

In this note, we estimate the economic effects of the increases in tariffs between China and the USA since the beginning of 2018, taking into account the investment channel. As of the bilateral Phase One agreement in early 2020, the United States has raised tariffs on about $335 billion of Chinese goods and China has raised tariffs on about $120 billion of US goods. Since then, there have been a number of papers that have quantified the potential impact of those bilateral tariff hikes (Charbonneau and Landry, 2018; Ferraro and Van Leemput, 2019) and there is a growing number of papers that have studied the impact on the U.S. economy (Caldara et al., 2019; Mix, 2019; Flaaen and Pierce, 2019; Cavallo et al., 2019; Waugh, 2019). However, most quantitative international trade models abstract from the impact of tariffs on investment and focus predominantly on consumption effects. This seems at odds with the bilateral trade data, which show that the United States imports a notable fraction of its capital goods (nearly 40 percent) from China.

First, we document the structure of final demand and its relationship with trade flows between China and the United States. We show that the United States imports more from China in sectors that are used intensively for final investment including machinery and equipment, whereas China"s imports from the United States in these sectors are much smaller as a share of expenditure. Second, we highlight that the United States has increased tariffs on a notable amount of those goods that are used intensively in investment. Finally, we quantify the impact of the currently implemented tariff hikes on the long run GDP levels of the United States and China through the lens of an international trade model, which takes into account differences in demand composition across consumption and investment, and a dynamic investment decision.

We find larger quantitative effects on both U.S. and Chinese GDP relative to canonical models of trade, which do not consider investment and capital accumulation. Specifically, our trade model estimates that the currently implemented tariffs would reduce the long run level of U.S. and Chinese GDP by 1.3 percent and 0.7 percent, respectively. This result suggests that the United States is estimated to experience larger GDP losses from the currently implemented tariff hikes than China. This result is in contrast to previous work that estimates China has more to lose in a mutual increase in tariffs than the United States, as Chinese exports to the United States represent a larger share of the Chinese economy than U.S. exports to China as table 1 highlights.

The intuition for our result is driven by the demand composition of international trade. The United States imports a large amount of goods from China used intensively for investment and has raised import tariffs on those goods. As such, the relative cost of investment to consumption has increased notably, thereby reducing investment and capital accumulation over time, which has larger long-run effects on GDP. In contrast, China imports more from the United States in sectors used intensively for consumption including agricultural goods. Given that those are more easily diverted away and do not account for a large share of inputs into other sectors, China"s losses are smaller relative to those in the United States. All told, we find that the demand composition of international trade matters when studying the impact of tariff hikes.

In our analysis, we include 30 separate countries and a rest-of-the-world (ROW) entity modeled as one aggregate block.2 The model includes 40 sectors, of which 20 are tradable and 20 are non-tradable. We collected data on (1) trade flows, (2) tariffs, (3) input-output structures, sectoral consumption and investment shares, (4) sectoral gross output and value added, and (5) capital stocks and labor endowments of low- and high-skilled workers from several data sets. More details on the data collected and industries considered are provided in the appendix.

This section describes bilateral trade between China and the United States in more detail, with a focus on demand composition and its relationship with trade flows. Specifically, we focus on the difference in the sectoral composition between final consumption and investment. Figure 1 shows the sectoral consumption and investment shares (yellow and blue bars) in tradable sectors for the United States and China. The same figures also plot in the right axis the share of sectoral expenditure on bilateral imports (red dots). For instance, consider the machinery sector in the United States. The blue bar implies that this industry accounts for approximately 6 percent of final investment, while the yellow bar highlights that it only accounts for less than 1 percent of final consumption. The red dot shows that approximately 10 percent of total expenditure on Machinery in the United States is on goods produced in China.

A first takeaway from figure 1 is that the sectoral composition of final consumption is very different from that of final investment.3 Moreover, sectors with high shares in final consumption tend to be the ones with low shares in final investment and vice-versa. This observation implies that sector-specific tariff hikes will have different implications for the cost of final consumption goods relative to final investment goods. Note that this applies to both countries even though expenditures shares for all tradeable sectors in aggregate consumption and investment vary significantly across countries.4

A second and more important take away from figure 1 is that bilateral trade is tilted towards those sectors that are used more intensively for final investment—high blue bars are typically accompanied by higher red dots. To underscore this point, we consider a simple measure of the bilateral tradability-bias of investment relative to consumption by regressing bilateral trade shares—the red dots—on the difference between investment and consumption expenditure shares—the difference between the blue and yellow bars—and comparing the slope estimates of these regressions. We obtain slope coefficients of 0.24 and 0.07 for the United States and China, respectively. This result implies that sectors that are more open are more intensively used for investment and that this relationship is stronger for the United States, implying that trade is more tilted towards final investment goods in the United States than in China.

Next, we focus on sectoral bilateral tariffs implemented between the United States and China. Figure 2 presents data on bilateral tariff increases between the United States—blue bars—and China—white bars—under the Phase one agreement in early 2020 across tradable sectors.5

The figure shows that these increases have been substantial for most sectors, averaging 17.8 and 15.8 for the United States and China respectively. Even though average increases in bilateral tariffs do not differ significantly across countries, sector-specific increases do. For instance, relative to China, the United States imposed greater tariff increases in highly traded sectors like electrical, communication, and medical among others. According to our previous analysis, these differential increases across sectors will have differential effects across final consumption and investment according to the demand composition of bilateral trade. Assuming that higher bilateral tariffs fully pass-through to sectoral prices, we can construct implied changes in the prices of final investment and consumption in each country. By doing so, we obtain that the price of final investment in the United States would increase by 0.33 percentage point, while that of final consumption would only increase by 0.07 percentage point. China would experience an increase of 0.04 percentage point on the prices of both final investment and consumption. Hence, U.S. tariff increases on Chinese imports have been clearly tilted toward those sectors used more intensively for investment.

How much are these bilateral tariff increases estimated to affect the world economy? To answer this question, we analyze the impact of the currently implemented tariffs using a quantitative international trade model that builds on the seminal work of Eaton and Kortum (2002) to include: (1) multiple sectors with input-output linkages, (2) three factors of production including capital, skilled, and unskilled labor, and (3) dynamic investment decisions.6

Using the model, we estimate the effects of the increases in tariffs between China and the United States under the Phase One agreement. We solve for a new steady-state equilibrium under Phase One tariffs using our international trade model and compute the changes in real long run GDP for the United States, China and the other countries relative to our baseline scenario.

The macroeconomic consequences of the increase in implemented tariffs between the United States and China are shown in figures 3 and 4. Figure 3 shows the long run effects on GDP in China, the United States and all other countries included in our sample.

Figure 3 shows that the implemented tariffs between the United States and China are estimated to lower world GDP by 0.4 percent, where half of the decline is driven by a drop in investment and capital stocks. This decline in global GDP is more than entirely driven by a decline in GDP in the United States and China, as most of the other countries actually gain.7 The United States and China both experience a decline in GDP, of 1.3 and 0.7 percent, respectively, which are quantitatively large effects. For example, Ferraro and Van Leemput (2019), in a model without investment, estimate that the United States and China would suffer negative long-term effects on the level of GDP of 0.3 and 0.4 percent, respectively, under a more dire scenario where all bilateral trade is subject to a 25 percentage point increase. Therefore, we find larger quantitative impact on both U.S. and Chinese GDP relative to canonical models of trade, which only include labor as a factor of production.

The second main finding is that the United States is estimated to suffer larger losses than China, which is also in contrast to canonical models of trade without investment. The intuition behind this result can be seen from figure 4, which shows changes in the relative price of capital to consumption after the tariff increases. As the figure highlights, the relative price of capital surges for the United States, which in turn depresses U.S. investment. This finding underscores the crucial role China plays in the acquisition by the United States of intermediate goods used for U.S. investment and of capital-intensive goods.8

For China, the model estimate also suggests a significant decline in the long run level of GDP, which reflects China"s loss in international competitiveness compared to other countries, which lowers exports to the United States and in turn forces factors of production into less productive sectors. That said, we find smaller effects on Chinese investment as China"s dependence on capital-intensive goods from the U.S. is relatively small. As shown in figure 4, the relative price of capital for China only increases marginally. All told, our results highlight the crucial role of the demand composition of bilateral trade and the need to explicitly model investment decisions in studying the long run effects of tariff hikes.

Caldara, D., M. Iacoviello, P. Molligo, A. Prestipino, and A. Raffo (2019): "The Economic Effects of Trade Policy Uncertainty," Journal of Monetary Economics, Forthcoming.

Ferraro, J. K. and E. Van Leemput (2019): "Long-Run Effects on Chinese GDP from U.S.-China Tariff Hikes," Board of Governors of the Federal Reserve System, FEDS Notes.

Flaaen, A. and J. Pierce (2019): "Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector," Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Working Paper-086.

Reyes-Heroles, R., S. Traiberman, and E. Van Leemput (2020): "Emerging Markets and the New Geography of Trade: The Effects of Rising Trade Barriers," IMF Economic Review, 68, 456–508.

Timmer, M. P., E. Dietzenbacher, B. Los, R. Stehrer, and G. J. de Vries (2015): "An Illustrated User Guide to the World Input-Output Database: the Case of Global Automotive Production," Review of International Economics, 23, 575–605.

Bilateral Trade:We use bilateral trade from the United Nations Statistical Division Commodity Trade (UNCOMTRADE) database for 2016 at the Harmonized System 6-digit (HS-6) level.

Bilateral and Sectoral Tariffs:We collect sectoral tariff data from the United Nations Statistical Division-Trade Analysis and Information System (UNCTAD-TRAINS) and Most-Favored Nation (MFN) databases for 2014 and 2016, respectively. The UNCTAD TRAINS data contain bilateral tariffs at the HS-6 product level. The MFN data provide importer-specific MFN tariff rates. We then aggregate bilateral tariffs at the HS-6 level to sectoral bilateral tariffs for the tradable sectors in Table 2 using bilateral trade weights. All told, we compute 31 by 31 bilateral tariffs for each of the 20 tradable sectors in 2016 and assume infinitely large trade barriers for the 20 non-tradable sectors to serve as our baseline. The implemented and proposed tariffs are computed using the lists released by the USTR and China"s Ministry of Commerce.

Input-output tables, sectoral consumption and investment shares: We use the World Input-Output Database (WIOD) for 2014 to compute the input-output coefficients as the total dollar value of an input sector"s intermediate goods divided by the total dollar value of the output sector"s inputs.9

Capital stocks and labor endowments of low- and high-skilled workers:We use the Socio Economic Accounts for 2014 to get the capital stocks and labor endowments of low- and high-skilled workers.

1. International Finance Division, Federal Reserve Board, Washington D.C. The views expressed herein are those of the authors and do not necessarily reflect those of the Board of Governors of the Federal Reserve System or its staff. We thank Shaghil Ahmed, whose insightful comments improved this note significantly. Return to text

2. The 30 countries include Argentina, Australia, Austria, Brazil, Canada, Chile, China, Denmark, Finland, France, Germany, Greece, Hungary, India, Indonesia, Ireland, Italy, Japan, Mexico, the Netherlands, New Zealand, Norway, Portugal, South Africa, South Korea, Spain, Sweden, Turkey, the United Kingdom, and the United States. Return to text

4. For instance, final consumption and investment expenditure shares of tradable sectors in the United States are 11.8 and 29.9 percent, respectively, while for China these numbers are 38.3 and 32.6 percent, respectively. Return to text

7. Most countries gain because of trade diversion that increases demand for goods produced in countries other than the United States and China. Still, some countries may lose because of negative terms of trade effects, like the case of Greece in our exercises. Return to text

8. Recent work by Flaaen and Pierce (2019) shows that the U.S. tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices through rising input costs. Return to text

Reyes-Heroles, Ricardo, Charlotte T. Singer, and Eva Van Leemput (2021). "The Effect of U.S.-China Tariff Hikes: Differences in Demand Composition Matter," FEDS Notes. Washington: Board of Governors of the Federal Reserve System, March 04, 2021, https://doi.org/10.17016/2380-7172.2845.

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A tariff is a type of tax levied by a country on an imported good at the border. Tariffs have historically been a tool for governments to collect revenues, but they are also a way for governments to try to protect domestic producers.

As a protectionist tool, a tariff increases the prices of imports. As a result, consumers would choose to buy the relatively less expensive domestic goods instead.

In today’s global economy, many products bought by consumers have parts from other countries or were assembled overseas. As a result, tariffs can also affect consumers of products that they believe were made in their home country.

Many economists, however, argue that tariffs create market distortions that can actually harm domestic consumers over time. They could also lead to the imposition of tit-for-tat tariffs among countries on their respective exports that could lead to a damaging trade war.

In today’s market-leaning global economy, tariffs have earned something of a bad reputation. Many economists argue that they are bad for the economy and harmful to consumers.

For instance, the Smoot-Hawley Tariff has been blamed for worsening the Great Depression in the 1930s. In an attempt to strengthen the U.S. economy during the Great Depression, Congress passed the Smoot-Hawley Tariff Act, which increased tariffs on farm products and manufactured goods. In response, other nations, also suffering from economic malaise, raised tariffs on American goods, bringing global trade to a standstill. Because of the tariffs during that era, economists have estimated that overall world trade declined about 66% from 1929 to 1934.

Since then, policymakers on both sides of the aisle have shied away from the use of trade barriers like tariffs and instead toward free-market policies that allow nations to specialize in certain industries and incentivize optimal efficiency. Indeed, the United States had not broadly imposed high tariffs on trading partners since the early 1930s.

This more-or-less laissez-faire approach to trade in the United States remained after World War II up until the election of President Donald Trump. Trump was one of a few presidents to speak openly about trade inequities and the threat of tariffs when he vowed to take a tough line against international trading partners, especially China, to help American blue-collar workers displaced by what he described as unfair trade practices. In addition to tariffs on Chinese imports, the Trump administration also levied taxes on products made in Canada, Mexico, and the European Union (EU), among others. These were subsequently rolled back by the Biden administration.

Tariffs are used to restrict imports by increasing the price of goods and services purchased from another country, making them less attractive to domestic consumers. There are two types of tariffs:

Governments may impose tariffs to raise revenue or protect domestic industries—especially nascent ones—from foreign competition. By making foreign-produced goods more expensive, tariffs can make domestically produced alternatives seem more attractive.

Governments that use tariffs to benefit particula