US temporarily exempts tariffs on some Chinese products including smart watches and medical devices

On Tuesday local time, the Office of the United States Trade Representative announced that the tariff exemption period for some Chinese goods, including smart watches and certain medical masks, will be extended for another four months to the end of 2020. The previous one-year exemption period expired on September 1.

Last year, the Trump administration announced a 15% tariff on about $125 billion worth of Chinese goods, and then reduced the tariff rate to 7.5% in the first phase of the trade agreement signed by China and the United States in January this year, but some of the goods had previously been temporarily exempted from the tariffs.

The goods temporarily exempted from tariffs include many Bluetooth and wearable data transmission devices, involving products imported from China by Apple, FitBit, Sonos and other technology companies.

The extended list also includes medical equipment such as masks, respirators, stethoscope covers, gauze sponges, blood pressure cuffs, etc. Products such as upright pianos, LCD display modules, and stainless steel watch cases have also been postponed.

The Office of the United States Trade Representative previously granted these products a one-year tariff exemption period. The latest announcement did not explain the specific reason for extending the tariff exemption period for only another four months.

On the morning of August 25, Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and chief negotiator of the Chinese side of the China-US Comprehensive Economic Dialogue, spoke with US Trade Representative Lighthizer and Treasury Secretary Mnuchin by telephone at their request.

The two sides held constructive dialogues on strengthening macroeconomic policy coordination between the two countries and the implementation of the first phase of the China-US economic and trade agreement. The two sides agreed to create conditions and atmosphere to continue to promote the implementation of the first phase of the China-US economic and trade agreement.

In August this year, State Councilor and Foreign Minister Wang Yi said that the so-called "decoupling" between China and the United States is neither feasible nor reasonable. Wang Yi has repeatedly stated that China's development cannot be separated from the world, and the world's development cannot be separated from China. "Decoupling" from China means "decoupling" from opportunities, "decoupling" from the future, and in a sense, "decoupling" from the world.

It is worth noting that in early August, the Office of the United States Trade Representative (USTR) issued the latest announcement, extending the exemption period for additional tariffs on a batch of Chinese imported goods, including nearly 30 items of finished furniture and accessories, until December 31, 2020.

Starting from September 24, 2018, the United States imposed additional tariffs on Chinese imports worth up to 200 billion US dollars. Subsequently, it implemented a policy of exempting 15 batches of Chinese imports from the additional tariffs, and the exemption period lasted until August 7 this year.

To this end, one day before the exemption period expired, the Office of the United States Trade Representative announced its decision to extend the exemption period for certain imported goods.

On September 1 last year, the United States began to impose a 15% tariff on some Chinese products. At that time, USTR listed several batches of "exemption lists" for Chinese products subject to tariffs. On August 28 last year, USTR announced that it would extend the tariff exemption period for a number of products to September 1, 2020. 

This time, just before the exemption period for these products expired, the United States announced an extension. However, it is worth mentioning that the extension period is not one year as before, but four months. 

Last July, the US government announced that it would exempt 110 types of high tariffs on Chinese exports to the US, including medical equipment and electronic products. Some of the Chinese products for which the exemption period has been extended this time are from this category.

In August this year, USTR extended the exemption period for tariffs on a batch of Chinese imported goods, including nearly 30 items of finished furniture and accessories, until December 31, 2020.

Why are these products exempted?

The Chinese products covered by the extended exemption this time cover a wide range of categories. In terms of significance, these products can be roughly summarized as those needed by the US government, those needed by US companies, and those with low US demand.

Medical equipment such as masks are obviously needed in the United States. According to real-time data from Johns Hopkins University, as of 10 a.m. today, the cumulative number of confirmed cases of COVID-19 in the United States has reached 6.25 million. The U.S. media analyzed the data and pointed out that currently one in every 55 Americans is infected with the new coronavirus, and one in every 2,000 Americans has died from COVID-19.

The still severe epidemic has forced Trump, who previously wore no mask, to wear a mask. The huge demand for medical equipment in the United States is almost unnecessary.

According to foreign media reports, during the prevention and control of the first wave of the global epidemic, China was the world's largest exporter of medical equipment. In May this year, the United States imported as much as 92% of Chinese medical equipment such as medical masks. Due to proper epidemic control and rapid resumption of work and production, China is still able to continue to export related products while ensuring internal supply. 

The extended exemption list also includes medical devices such as masks, respirators, stethoscope covers, gauze sponges, and blood pressure cuffs, which are the Chinese medical devices that are most imported by the United States.

The wide variety of electronic components and other goods on the list are urgently needed by American companies. 

Among them, Apple is the first to bear the brunt. Data shows that it takes more than 2,000 parts to produce an iPhone, involving more than 600 supporting suppliers. Among the more than 600 global suppliers of Apple mobile phone parts, 349 are located in the Chinese market, accounting for as much as 58%.

Therefore, if tariffs are continued on such Chinese products, it is American companies like Apple that will be affected. This list also includes Chinese products such as Bluetooth and wearable devices, which are the main products imported from China by American technology companies such as FitBit and Sonos.

Some of the products on the list may not have much impact on the US market. For example, stainless steel watch cases and other products have been "sanctioned" by the United States numerous times in the past 10 years. Now, the United States may have found a corresponding import alternative country, and whether these products can regain the US market remains to be seen.