Phase 1 Trade Deal

‘Phase 1’ of the trade deal with China was signed Wednesday, January 15th. As predicted, this agreement failed to address many of the issues that initially started the trade war in 2017 and left the majority of tariffs in place.


As part of ‘Phase 1’, China promised to provide more protection for intellectual property, stop forced technology transfer, and increase U.S. purchases by more than 50% in the next two years. China has a history of backsliding with similar pledges. However, the Trump administration remains adamant that the terms of the deal can and will be enforced. In return, the United States agreed to halt new tariffs that were scheduled for December and reduce select tariffs from 15% to 7.5% on $112 billion USD worth of Chinese products (NPR).


Which Tariffs Remain

Unfortunately for the manufacturing sector, tariffs remain in place on more than $360 billion USD worth of Chinese goods. The only items positively impacted by ‘Phase 1’ are those in lists 4A and 4B. Products found on list 4A will be taxed at the reduced rate of 7.5%, and those in 4B will not receive additional tariffs at this time. The tariffs for products found on lists 1,2, and 3 are unchanged by the trade deal and will remain at 25% for the foreseeable future. Many of our customers will continue to be impacted by the steep tariffs on items found in list 3, including textile materials, leather products, bags, and more.


The Trump administration said that that the outstanding tariffs could potentially be lifted as part of a ‘Phase 2’ deal. Trump has already pushed ‘Phase 2’ past the upcoming election, despite pressures to wrap up the trade war before November 2020 (NYT).


If you need help understanding how the tariffs affect your production in China, then contact us today!