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President Trump Announces Reduction of Section 301 Tariff Rates and Suspension of Planned List 4B Tariffs

The United States has reached an agreement with China that will reduce the tariff rate to 7.5 percent for approximately $120 billion of Chinese goods (a reference to merchandise on List 4A) currently subject to Section 301 duties. Additionally, tariffs on a further $160 billion in Chinese goods (List 4B), originally due to take effect on December 15, will be suspended.

Tariffs of 25 percent on approximately $250 billion of Chinese merchandise on Lists 1 through 3 will remain in effect pending continuing negotiations over a possible “Phase Two” deal. These negotiations are expected to resume in early January.

In exchange, China has reportedly made commitments to purchase $16 billion more in U.S. agricultural goods in each of the next two years, increasing annual agricultural purchases to approximately $45 billion. China has also committed to buy additional U.S. manufactured goods, energy, and services. U.S. Trade Representative Robert Lighthizer has stated that he expects China to reduce its own tariffs on these items that were imposed in retaliation for the U.S. Section 301 action. In addition, China has committed to improve its protections of intellectual property, eliminate requirements for companies to transfer technology in exchange for administrative licenses, refrain from competitively devaluing the Chinese currency, remove foreign equity caps on life insurance, and reduce non-tariff barriers and discriminatory practices in agricultural standards, biotech approvals, geographical indications, trademarks, pharmaceuticals, and counterfeit and pirated goods.

The 86-page Phase One agreement must now go through a legal review by the U.S. and Chinese governments before it can be signed. The signing ceremony is expected to take place in the first week of January 2020.

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