In March of 2018, President Trump just signed a measure that the US will impose $50 billion in tariffs on Chinese imports. Sources say that import duties on Chinese products will rise to a flat rate of 25% if the details of the measure come to pass (more on that later)!
Why is Trump doing this?
The answer is business and politics in my view.
On one hand, Trump wants to reduce the US trade deficit with China. They want China to purchase more US products: from airplanes, to resources like natural gas, to raw materials, food and beverages, technology, and pharmaceutical products.
In addition, the US wants to nudge China to open up their market to US businesses. There have been accusations that China is not playing by the rules they agreed when they entered the World Trade Organization (WTO) over a decade ago. For example many feel that it is an unfair playing field for major US companies in China especially in the tech sector (Google, Facebook) and pharmaceuticals. There are also concerns of lack of Intellectual Property protection and “technology theft” in China.
In short, the US wants China to allow more open access and play by the WTO rules they agreed to when they joined.
So who will this affect?
Potentially any businesses that import products from China. This includes Amazon Sellers who source from China and ship those products to the US.
They may face HIGHER import duties. If you check with your customs broker you will find that most of your products have a duty rate in the single digits depending on your product. So if your products are affected by the new laws then the import tax you will pay will skyrocket to 25%!
China is not taking this sitting down. They are fighting back by imposing tariffs on US imports to China. US Pork, wine, steel pipes, and recycled aluminum will face higher import duties in China as a result.
What products will be affected by the tariff?
The answer is it depends.
Right now it’s in the hands of US Trade Representative Robert Lightizer. He has been appointed to review and submit a list of proposed products that will be affected by the tariffs by April 6, 2018.
Following that will be a 60 day period of review and comment period. “We’ll announce them before very long and then we’ll go through a 60-day period where we’ll give the public a chance to comment on the good and the bad things in there,” said Lighthizer.
This means the earliest the new tariffs will pass is June 2018.
While we don’t know the details of the products affected yet, Lightizer claims that the affected products are “largely high-technology things” picked by a computer algorithm.
Again we don’t know the exact details until Lightizer’s review and report but broadly speaking these are the major categories of Chinese imports into the US. If I were to speculate then the categories near the top may fall within the “high technology things” he mentioned.
What can you do as an e-commerce business owner?
Smart sellers are already diversifying their sourcing away from China. They are sourcing products from Vietnam, India, and other countries.
However, before you say “Zai Jian (goodbye)” to China, remember sourcing and supply chain decisions aren’t solely made on price alone.
China’s manufacturing and export experience is quite mature now. Compared to that, many of China’s manufacturing competitors may not be able to compete in various ways. Beware that other countries may not be capable to manufacture the products that are made in China.
Also, their quality may be lower, their communications less efficient, and you may expect longer lead times as well.
But in all, “when the tide rises, all boats rise.” Depending on the final details of the tariffs and if your product categories are affected, you and all competitors will be paying the new higher prices to import your product. It’s going to be a level playing field for those importing from China. The US is just making China’s imports less competitive
Many sellers I’ve spoken to have decided that they will pass the costs onto their customers.
Recently I was contacted by Bloomberg and shared some of my thoughts from the Amazon sellers’ perspective: “On Amazon, more than half of product listings come from smaller businesses that source from China….and they would be hit hard.
“These guys are going to be left holding the new tariff bill and those prices will go straight up,” Huang said. “This year’s Christmas could be a lot more expensive.””