The Trump administration on August 7 imposed new “reciprocal” tariffs ranging from 15% to 41% on 65 countries around the globe (see the July 31 executive order). Analysts assess that the average U.S. tariff has now risen eight-fold from about 2.5% in January to approximately 20% today (21.1% according to the Tax Foundation and 18.6% according to the Yale Budget Lab, for example). The Chamber’s August 1 International Trade Update provides further details.
A few countries have received exceptional treatment in the past week:
Chip, Pharma Duties Near? President Trump on August 6 said his administration plans to impose a 100% tariff on “all chips and semiconductors coming into the United States.” He added that companies that make domestic investment commitments can avoid the high tariffs: “If you have made a commitment to build or are in the process of building [in the U.S.], as many are, there is no tariff... I think the chip companies are all coming back home. They’re all coming back.”
A day earlier, the president told CNBC’s “Squawk Box“ that planned tariffs on pharmaceuticals imported into the U.S. could eventually reach as high as 250%. He said he will initially impose a “small tariff” on pharmaceuticals, but then in a year to a year and a half “maximum” he will raise that rate to 150% and then 250%. Officials have indicated these initial moves could come within a week.
For further information, please contact Senior Vice President and Head of International John Murphy (jmurphy@uschamber.com) and Executive Director for International Policy Isabelle Icso (iicso@uschamber.com).
The U.S. Customs and Border Protection (CBP) on August 4 released guidance for the “reciprocal” tariffs, recapitulating the exemptions outlined in April 2’s Annex II list of goods excluded from the “baseline” and “reciprocal” tariffs as well as some limited guidance on transshipment. The July 31 executive order setting out the “reciprocal” tariffs also mentioned plans to impose a 40% ad valorem rate for transshipped goods on top of the “reciprocal” duties.
Transshipment Thresholds: Transshipment traditionally refers to the illegal practice of claiming a good has originated in a given country when in fact it has merely transited its territory—without undergoing additional production or “substantial transformation”—so as to secure a lower duty rate. However, officials have recently used the term expansively in a manner that indicates the goal is to devise stricter rules of origin.
The ultimate goal is to permit CBP to impose a higher duty on the Chinese content in a product assembled in, e.g., Vietnam or on the entirety of a product with Chinese content above a certain level. The private sector continues to await details on criteria the administration plans to use to determine what goods are deemed to be transshipped by its definition. Some of these rules may be subject to negotiation with other countries, particularly in Southeast Asia.
This week’s CBP’s guidance states:
"Goods determined by CBP to have been transshipped to evade applicable IEEPA Reciprocal duties are subject to an additional ad valorem duty of 40 percent. CBP will direct a correction of the entry and/or entry summary to be filed, replacing the IEEPA Reciprocal HTSUS number with heading 9903.02.01 or take action upon liquidation to collect the 40% applicable duties. The 40% duties are in addition to any other applicable or appropriate fine or penalty, and any other duties, fees, taxes, extractions, or charges applicable to goods of the country of origin."
U.S. Content Not Tariffed: Additionally, the notice outlines a U.S. content threshold of “at least 20%” that will allow a reduction in duty owed:
“For articles in which at least 20% of the value of article is U.S. originating, the U.S. content will not be subject to the reciprocal tariff. The reciprocal tariff will be assessed on the non-U.S. content.”
For further information, please contact Executive Director for International Policy Isabelle Icso (iicso@uschamber.com).