As most of the policy world was celebrating time away from DC during the holidays, the United States Trade Representative (USTR) announced an extension of current exclusions to 301 tariffs for products imported from China until May 31, 2024. This is welcome news to those benefiting from current exclusions (352 current exclusions and 77 COVID-related exclusions) given the December 31st expiration previously announced by the USTR. While this is only a five-month extension, the announcement prevents the reinstatement of 301 tariffs (up to 25%) on industries importing products from China.
In addition to the extension, the USTR announced a January 22nd comment period to “evaluate each exclusion on a case-by-case basis.” The USTR will evaluate products along the following criteria:
Whether these products can be sourced outside of China
What current efforts to source these products exist beyond China
How much additional time is needed and reasons that additional time is needed to source domestically or through a third country
What the likelihood is of shifting sourcing outside of China
The sourcing of products covered by exclusion is likely to shift outside of China
What the impact is on U.S. interests
The extension of exclusions is not new to impacted industries. This announcement represents the fifth extension (including several reinstatements) since the tariffs were initially implemented. While these extensions and reinstatements are welcomed by those impacted, they drive uncertainty for companies who need a longer view on costs to plan for product production, shipments, pricing, and delivery. In addition to the points the USTR has outlined for the comment period (above), many will likely also push for a longer, more predictable exclusion extensions.
Of course, no issues can be analyzed these days without some consideration of the upcoming election. It is clear that it is politically impossible to eliminate the 301 tariffs currently in place altogether in the near-term. Punting until May also positions any USTR decisions five months closer to an election, where more attention will be paid to every administration announcement (especially if former president Trump is the nominee given that he originally created and implemented these tariffs).
Expect a busy month in January as industries get comments together around their existing exclusions. There will also be efforts to push for a new exclusion process for products that are not currently excluded as well as more attention on other trade-related issues that have been on the sidelines for a while, including Generalized Systems of Preferences (GSP), Miscellaneous Tariff Bill (MTD), and De Minimis thresholds for products imported into the U.S.
It will also be important to watch the evolving relationship between the U.S. and China, which will play an outsized role in any actions by the Administration going forward.