IPC Weighs in on Growing Trade Disputes

In recent months, the U.S. Government has launched several initiatives that are roiling the waters of international trade.

NAFTA: In North America, the Trump administration prioritized one-on-one talks with Mexico, which produced a “handshake agreement” that was announced by President Trump on August 27. Canadian negotiators are in DC this week to rejoin the talks, with the hope of reaching a trilateral deal very soon. Both Mexico and Canada have insisted that any new deal must be negotiated among all three partners.

Because U.S. law requires a 90-day notice to Congress before any trade deals can be voted upon, President Trump needs to notify Congress of any new trade deal no later than September 1, if he wants to complete all action before a new Mexican president takes office on December 1.

Details of the agreement reached by the U.S. and Mexico are scant. However, we do know the new agreement would require 75% of auto content to be made in North America in order to qualify for duty-free treatment; NAFTA currently requires 62.5%. The new agreement also would require 70% of steel, glass, and aluminum used in imported autos to come from North America. Additionally, a substantial portion of each vehicle would be required to be manufactured in a “high wage factory.”

IPC is open to a NAFTA 2.0 and is working to secure stronger investor dispute-settlement protections. Over the summer, IPC has been participating in congressional advocacy with other industry associations, underscoring the importance of the North American electronics market and supply chain. We will continue to monitor developments closely and share information with IPC members.

China: Meanwhile, IPC also continues to raise our members’ concerns over the escalating trade war between the U.S. and China. In addition to Section 232 tariffs on steel and aluminum, the US Trade Representative has released three lists of Section 301 tariffs. These tariffs are punitive in nature, aiming to retaliate against China for what the U.S. regards as discriminatory technology transfer policies. List 1 has been finalized and went into effect on July 6th. The deadline for public comments has closed for List 2, and a final list will be released as early as this week. Public comments on List 3 are due by September 5.

The USTR has already established a process for applying for exclusions from the Section 232 tariffs and the first list of Section 301 tariffs. You can learn more about the process for 301 tariffs in the USTR’s Federal Register notice, which lays out procedures for securing an exemption from the 25% tariff. The USTR will consider requests based on the availability of that product outside of China, the severity of economic harm to U.S. interests, and the strategic significance of that product to Beijing’s “Made in China 2025” campaign.

IPC has been active throughout, soliciting feedback from members and submitting comments to the USTR on the proposed lists.

Meanwhile, China has said it may impose tariffs on an additional $16 billion in U.S. autos and energy products, and it has threatened to levy another $60 billion worth of tariffs on U.S. imports if President Trump goes through with his threat to impose 25% tariffs on $200 billion of Chinese goods. One research firm claims that “China’s $60 billion figure hits 56% of U.S. exports, including 85% of all electrical machinery and 75% of electronics.”

Some IPC members are reporting that they may be forced to move work they currently perform in the U.S. to other countries because of the tariffs. What about your company?

What You Can Do: IPC would appreciate your support in identifying the tariff codes your company or the industry uses to import goods from China to the U.S. and what the additional impact would be if USTR imposes 25% tariffs. Review the third list of affected goods, and let us know your reactions ASAP. IPC will be submitting comments to the U.S. Trade Representative by September 5.

For more information, listen to a recent IPC webinar on these trade disputes (IPC member login and password required) and how they could affect your company.

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