As the Trump administration considers whether to levy additional tariffs of as much as 25 percent on another $200 billion worth of imports from China, a decision some observers think could be imminent, a wide range of trade groups have registered their opposition.

As part of its response to a Section 301 investigation determination that China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory, the administration has already imposed an additional 25 percent tariff on approximately $50 billion worth of imports from China. When Beijing responded in kind, the White House drafted a list (commonly referred to as List 3) of an additional 6,031 tariff lines from China worth $200 billion that could also be hit with higher tariffs.

However, in a recent letter, dozens of organizations representing U.S. manufacturers, farmers and agribusinesses, retailers, technology companies, natural gas and oil companies, importers, exporters, and other supply chain stakeholders questioned the legality of such a move. “With each new round of escalating tariffs, the products impacted have a more tenuous connection back to the market access and tech-transfer policies of the Chinese government that triggered the Section 301 investigation and have little relationship to the ‘Made in China 2025’ strategy,” the letter said. In fact, the administration itself has acknowledged that List 3 is “intended to punish China for its retaliatory tariffs and to force the Chinese government to reform its practices.” That could open a tariff increase on List 3 products to challenge in U.S. courts.

The letter also emphasized the broad impact of the proposed tariff hike. List 3 covers products across a much wider range of sectors and categories than the two previous lists, the letter said (e.g., seafood, electronics, chemicals, furniture, travel goods, energy, vehicles, toiletries, wood products, textiles, garden tools, and machinery) and will thus result in a broader negative impact on a much wider group of companies, workers, and consumers. U.S. manufacturers, service providers, and consumers – not Chinese companies or the government – “will bear the brunt of these new proposed tariffs,” particularly “small- and medium-sized businesses and their workers who lack the scale, resources, and options to weather or adapt to these tariffs.” The letter noted that these added costs will compound over time if the two sides continue to “harden their positions” and keep the tariffs and retaliatory measures in place.

President Trump has encouraged companies to shift their sourcing away from China (preferably to the U.S.) to avoid the proposed tariff increase, but the letter said this is not as simple as it sounds. “For any product, a U.S. importer would have to determine if an alternative supplier in another country could meet the cost, quality, safety, compliance and certification requirements to sell its product in the U.S. market or other foreign markets,” the letter said. Further, based on the process for imposing the Section 301 tariffs already in place, they would have to do so in “mere weeks,” a task the letter characterized as all but impossible.

Other problems the letter cited with a further tariff increase include (1) supply chain disruption if it coincides with the annual surge in imports ahead of the holiday season and (2) greater uncertainty about future developments that could dampen plans for new investment, expanded hiring, greater research and development, and new product launches.

© [2018], Sandler, Travis & Rosenberg, P.A. Originally published in the [09/13/2018] issue of the Sandler, Travis & Rosenberg Trade Report. Reprinted by permission.