A report by the Peterson Institute for International Economics claims that China is steadily increasing tariffs on American goods and lowering them on imports from other countries as a way to offset damage to its economy by U.S. retaliatory tariffs.
“While Trump shows other countries nothing but his tariff stick, China has been offering carrots. Beijing has repeatedly cut its duties on imports from America’s commercial rivals, including Canada, Japan, and Germany,” read the report.
China has increased tariffs on U.S. exports from 8% a year ago to 20.7% today, but has reduced tariffs for imports from other countries to 6.7%.
As early as 2018, the U.S. and other countries enjoyed a tariff of 8% on all goods. After the U.S. implemented Sec. 232 citing national security on April 2018, China increased the tariff on American goods to 8.4%. China again increased the tariff on U.S. goods in July 2018 to 10.1% then again in August 2018 to 14.4% and finally once again in September 2018 to 18.3% in retaliation. Tariffs peaked in June 2019 to 20.7%. During this time of ever increasing tariffs on U.S. products, China had reduced tariffs on other World Trade Organization member countries to 6.7%.
“While painful to U.S. exporters, China’s tariff reduction is not a violation of any WTO rules. So long as it keeps a tariff below the “binding” rate it has submitted to the WTO, China is well within its legal rights to reduce its applied MFN (Most Favourable Nation) tariffs to whatever level it chooses,” stated the report.
Only 56.3% of U.S. exports to China are currently under Chinese retaliatory tariffs, but more is expected should the United States place more tariffs on Chinese goods. But China is fighting back by buying goods it used to buy from the U.S. from other nations.
Two fishery products provide examples. The American lobster industry saw its exports fall by 70% after China imposed its retaliatory tariff of 25% on July 6, 2018.
Things were so bad that the industry sought federal assistance (though it has not normally been eligible for the subsidy programs) the Trump administration’s U.S. Department of Agriculture (USDA) did provide assistance. On the other hand, Canada’s lobster exports to China nearly doubled as it benefited from a three percentage point tariff cut in 2018.
Similarly, American exporters of Pacific salmon saw their sales to China decline after the retaliatory tariff, only to be replaced by Chinese imports from Japan. China had reduced the duty facing Japan by three percentage points.
In other instances, the new tariff on the United States was the only thing needed for China’s consumers to make the switch. China shifted much of its imports of US soybeans in 2018 to imports from Brazil and Argentina without further reducing its existing 3% tariff on soybean imports from those countries.
“Tariffs are costly to the country imposing them, and China is no exception,” stated the researchers. “Concern over such costs likely (explains) both China’s restrained retaliation against the United States and its decision to reduce tariffs toward the rest of the world.”
“This is not good news for U.S. exporters,” the report notes, further expanding that China “reducing tariffs on imports from other countries means U.S. exporters also face an increasing disadvantage relative to competitors in Canada, Japan, Europe, and elsewhere.”