Trump has spread his tariff and trade war around the globe. What he has labelled as “reciprocal” tariffs have been applied as of 12:01am today, April 9th, to U.S. imports from some 185 countries. Canada & Mexico have been excluded for now from this latest round of U.S. tariffs for CUSMA compliant goods. (All the more reason to ensure your company is CUSMA compliant.)
Largest Tariffs on China
The largest tariff of 104% has been imposed on China following a late Monday afternoon announcement from the White House that Trump was adding a further 50% tariff to the 34% he originally set as retribution for China announcing that it would match any new tariff. The U.S. already had a 20% tariff in place on Chinese imports and these new tariffs are cumulative. China is expected to meet this new punitive tariff shortly.
These Trump tariffs and Chinese countermeasures are expected to raise prices for U.S. consumers and manufacturers, fuel inflation, and increase the chances for a recession. No doubt there will be an impact on our industry for both brands who manufacture in China, and cosmetic manufacturers who use inputs sourced in China.
Companies that export U.S. manufactured cosmetics to China will also face the added costs of these tariffs in the Chinese market.
Considerations of U.S.-China Tariffs on Canada
With Chinese imports now the subject of 104% tariffs in the U.S., there are many questions as to the effect this may have on Chinese sourced products or manufacturing inputs that are distributed to Canada through the U.S., particularly where these are not directly passed through to Canada but rather included in North American distribution channels. It is anticipated that this will lead to changes in shipping and distribution routes to avoid U.S. tariffs.
CA will be seeking greater clarity on these issues from trade officials but affected CA members should be seeking professional advice to avoid surprises.
Tariffs on Other Countries Range from 10% to 50%
Despite being called “reciprocal” by Trump, the rates have no direct relationship to the tariff rates of the nations affected. They were, in fact, calculated by referencing the trade deficit that the U.S. has with each nation as calculated (or defined) by the Trump administration using the following formula:
Reciprocal Tariff (%) = U.S. Trade Deficit with Country/U.S. Imports from the Country
Further, a minimum tariff is being imposed even on countries where the U.S. has a trade surplus or no trade at all. This includes a 10% tariff for Australia where the U.S. currently enjoys a trade surplus and Australia is a trusted and valued ally in U.S. security. Two jurisdictions that were specifically included are the Australian territories of Heard Island in the Southern Ocean, and the British Indian Ocean Territory, both of which have no people other than British/U.S. garrison in the latter case. Closer to home, the 5,000 people who live on Saint Pierre and Miquelon off the coast of Newfoundland now face a 50% tariff on their ~$5M of exports to the U.S.
In addition to China, other major U.S. trading partners such as the European Union (20% tariff) and various U.S. allies in East Asia have also been hit with high tariffs. Several emerging economies have received massive tariff rates which could be disastrous for their economies and lead to political instability and greater emigration. Cambodia, for example, is a relatively poor country with per capita GDP of less than $3,000 US/year that now has a 49% tariff on their U.S. exports (41% of their total exports) of which 70% are textiles. It is hard to imagine how people earning an average less that $3,000 per year have been “ripping off the U.S. for years” as Trump has claimed.
Jurisdictions around the globe are now considering their options including the European Union which have indicated that they are prepared to use retaliatory tariffs if necessary. CA understands that cosmetics are included in the E.U. list of proposed retaliatory tariffs, which would further affect U.S. cosmetic exports.
U.S. Trade Representative (USTR) “National Trade Estimate” on Trade Barriers
The U.S. Trade Representative (USTR) released its National Trade Estimate outlining what the U.S. views as trade barriers for U.S. exporters in every jurisdiction. The document was intended to be used by Trump to provide examples of how the U.S. is being “badly and unfairly treated” by its trading partners and consequently as a further justification for his tariffs. After its release on April 1st and initial media coverage, it has been overshadowed by the announcement of “reciprocal “tariffs. It can be expected to be used by the U.S. in any re-negotiation of CUSMA.
The section pertinent to Canada can be found HERE.
The Expanding Trump Trade War – Timeline
BREAKING NEWS
China has announced today – April 9th – that in response to Trump’s further 50% tariff on Chinese imports, China is raising its’ tariffs on U.S. products from 34% to 84% effective tomorrow.
It will take business in Canada some time to assess what effects these mutual tariffs (104% on Chinese products imported into the US and 84% on U.S. products imported into China) will have on manufacturing inputs and finished goods that enter Canada through U.S. based supply chains.
