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U.S. companies that are paying an additional 10% duty on goods that they import from China will see that duty increase to 25% on Friday.

The USTR today issued a federal register notice that the 10% tariffs on $200 billion of Chinese goods will increase to 25% as of this Friday, May 10, at 12:01 a.m. EST. These goods represent the almost 5,800 products covered under the third list of Section 301 tariffs that went into effect on September 24, 2018, and now join the first two lists of $50 billion in goods already subject to 25%.

With this move, almost half of all Chinese imports into the U.S. will now be subject to a 25% tariff. What’s more, Lighthizer said another notice may go out this week establishing a notice and comment period on a 25% tariff on the remaining Chinese imports.

This move comes after reports in recent days that China was reneging on a number of commitments. As recently as last week, many were expecting a deal to be reached as soon as this Friday that would see the removal of tariffs from a portion of the $200 billion in goods, with the remainder to follow quickly. These expectations were quickly dampened Sunday when President Trump tweeted that a fresh round of tariffs were coming.

What's Next?

Vice Premier Liu is still scheduled to meet with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Thursday and Friday of this week. However, reports are that China is also preparing retaliatory tariffs on U.S. imports. It is believed that China would make its retaliatory tariffs effective one minute after the U.S. tariffs go into effect.

Exclusion Process Coming

In February 2019, U.S. Trade Representative (USTR) Robert Lighthizer testified before the House Ways & Means Committee regarding U.S.-China trade issues, during which he testified that an exclusion process would be instituted on the $200 billion of goods subject to the 10% only if that tariff were increased to 25%.

But in follow-up written responses to questions raised at the February hearing that were recently published, Lighthizer stated, “Members of Congress believe that we should have an exclusion process for List 3. For this reason, we have begun preparations to launch a process by the end of the month.”

Making good on these comments, the USTR states that it will establish an exclusion process by which interested persons may request that particular products be excluded from the additional duties. USTR will publish a separate notice describing the process and procedures for submitting those requests.

We will continue to monitor developments and update you accordingly.