Keeping the China Tariffs: A Numbers Game

by Omar S. Nashashibi, co-founder, The Franklin Partnership, LLC

Thirty-three – that is the number of OEMs and Tier I suppliers that convinced the US Trade Representative in 2018 to lift the 25% tariffs on plastic injection molds. One hundred and fifty-two – that is the number of American Mold Builders Association members who formally contacted the USTR in November 2019 calling for the US Government to reinstate the tariff on Chinese imports. They succeeded, and on December 28, 2019, mold builders secured the protection again with the 25% tariff back in place. The AMBA is about to ask its members to step up again, for themselves and the US manufacturing industry.

This summer, 61 AMBA members filed comments in response to USTR’s inquiry as to whether support remains for continuation of the tariffs. Message received. The Biden administration is keeping the 25% tariffs in place on molds, dies, tooling and other imports from China while it conducts the required four-year review of the Section 301 actions.

The Biden administration now is conducting a full review of the impact of the US industry and economy tariffs, accepting public comments from supporters and opponents of the tariffs from November 15, 2022, to January 17, 2023. The input received from stakeholders, including AMBA and its member companies, will help inform USTR’s decision on whether to remove all tariffs, keep all in place or, more likely, lift some and restart an exclusion process for others.

The White House is under significant pressure from OEMs, Tier I suppliers and retailers to lift the 25% tariffs on over 6,800 Chinese imports, including molds, dies and tooling, as well as the 7.5% tariff on 3,200 goods from China.

AMBA members flooded USTR in 2019, and again in July 2022, delivering a powerful message to policymakers who decided to reinstate and retain the 25% tariffs on molds, dies and tooling. The association needs members to weigh in again with USTR and respond to notices from the AMBA, calling on manufacturers to file formal comments in support of keeping the tariffs in place.

USTR is asking for stakeholder input by January 17, 2023, with its questionnaire broken down into three sections. The first area on which the government is seeking comment is on the effectiveness of the Section 301 tariffs in eliminating China’s policy of intellectual property theft and forced technology transfer. One of the questions asks if there are other actions more effective that the USTR could take in obtaining the elimination of China’s actions. In addition, this first section seeks input on the economy-wide effects, including effects on domestic manufacturing.

Section B is the industry-specific portion, where AMBA will provide details about the membership, the benefits of the tariffs for manufacturing supply lines and the negative consequences of lifting the tariffs on molds, dies and tooling. AMBA is collecting data from companies to help underscore how the tariffs continue to support the industry’s higher capacity utilization rate, allowing for additional capital investments and supported profits.

The final Section calls for comments on specific tariff lines, such as the 25% tariffs on plastic injection molds. This is the most critical area for AMBA members to fill out – notably, question 20, which asks, “Explain why maintaining the current additional duties, including the current rate of duties, would or would not be effective in obtaining the elimination of or in counteracting China’s acts, policies and practices related to technology transfer, intellectual property and innovation.”

Sources in Washington indicate USTR is expecting a significant influx of comments from the public and will use that information to inform and support its decisions on whether to lift, maintain or expand the tariffs on specific imports. Since 2019, the AMBA has succeeded in reinstating and retaining the 25% tariffs on plastic injection molds and other tooling and dies. AMBA is utilizing recent data to support keeping tariffs in place. In July, both an AMBA member and the associations managing director testified in support of the tariffs before the US International Trade Commission, proving an effective voice for the industry and paving the way for retaining the tariffs.

Data compiled from government sources by the Peterson Institute for International Economics showed that imports of products not subject to tariffs are 50% higher today than immediately prior to the trade war, while imports from China facing a 25% tariff are down 22%. China now accounts for 18% of total imports, down from 22% in 2018.

The numbers are on the side of keeping the tariffs. The politics of today are for remaining tough on China. However, in Washington, D.C., facts are not always the deciding factor.

The US midterm election is in the rearview mirror, with the 2024 race for the White House coming up next. Tensions between Beijing and Washington, D.C. remain tight, with President Xi of China securing in October an unprecedented third five-year term in office.

Republicans on Capitol Hill and the 2024 campaign trail continue to pressure President Biden to remain tough on China, while the White House seeks to reduce US reliance on Chinese batteries and manufacturing inputs. Retailers and consumer groups are raising alarm over persistent inflation, echoing some calls from importers to lift tariffs.

The Biden administration is facing pressure from all sides and is unlikely to please all stakeholders. The administration’s approach instead is to appease as many as it can, while limiting the political and economic fallout from those on the wrong side of their actions. This is where the threat to AMBA comes in – USTR could lift some tariffs, but not all, while allowing exclusion requests for many imports but not for each industry.

This is a classic case of Washington picking winners and losers, which is why AMBA needs its members to stand up, have their voices heard and send a strong message to USTR against lifting the tariffs on molds, dies and tooling. The AMBA lobbying team also is working to head off attempts to secure another temporary exclusion for importers of plastic injection molds, and this effort by member companies in the four-year review process will go a long way to support these lobbying efforts.

Staying silent through January 17 only will help Chinese manufacturers. AMBA members should heed the call and file comments with USTR today.

Omar Nashashibi is a founding partner at The Franklin Partnership, LLC, a bipartisan government relations and lobbying firm retained by The American Mold Builders Association in Washington, D.C.