Update on U.S. Reciprocal Tariffs and Retaliatory Trade Actions

U.S.-China Trade

On 8 April, an Executive Order announced that, in response to China’s 34% retaliatory tariffs implemented on 4 April, the previous 34% reciprocal tariff on U.S. imports from China into the United States would be increased to 84% (a 50% delta) starting on 9 April. Yesterday, China announced it will increase its retaliatory tariffs on U.S. imports into China to 84%.  

In response to these tit-for-tat actions, the United States increased the reciprocal tariff on imports from China to 125% effective 10 April. The 125% reciprocal tariff will be applied in addition to the already implemented 20% IEEPA tariff related to fentanyl.

Tariff cost impacts:  Rather than provide tariff cost estimates, we believe this tariff action is a de facto import ban.

• A 125% tariff will likely halt US imports from China altogether.  As an example, in the US-EU trade dispute on beef hormones when the US applied 100% retaliatory tariffs on certain products from certain EU Member States, those US imports from those Member States dropped to zero.   
• Likewise, with a 84% retaliatory tariff on US goods, we believe China’s imports from the United States on manufactured food processing and packaging machinery will also drop significantly.   

U.S. Reciprocal Trade Action Modified and Higher Tariffs Paused  

Yesterday afternoon, the President Trump also announced a 90-day pause on the increase of reciprocal tariffs listed in Annex I of the original Executive Order.  

• The reciprocal tariff for all countries (other than China, Canada and Mexico) will remain at 10% until 9 July.  
• For Canada and Mexico, USMCA-compliant imports are not subject to tariffs and non-USMCA-compliant imports are still subject to 25% the IEEPA tariffs related to fentanyl and immigration.

Retaliatory Trade Action by Other Countries

This morning, the EU announced a 90-day pause on retaliatory tariffs that were reported yesterday as a response to 25% U.S. steel and aluminum tariffs and set to take effect on April 14.  

• In March, the EU had delayed retaliation from 1 April to 14 April on its initial list (which was developed in 2018 in response to U.S. steel and aluminum tariffs and never imposed) and requested stakeholder input on a broader list of products to target.  
• The EU’s finalized retaliation list targets $23 B in US exports but has not been released.

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Yesterday, Canada implemented 25% retaliatory tariffs on non-USMCA compliant vehicles in response to the U.S. automobile and auto parts tariffs. This will not impact industrial manufacturers of the machinery industry.