Trump Threatens Additional Tariffs While Trade Awaits List 3 Exclusion Process

President Trump issued two tweets this weekend threatening to increase the current 10% tariff on List 3 Chinese items from 10% to 25% to become effective on Friday, May 10. He further threatened to impose a 25% tariff on all remaining imports from China.  Whether the President could impose such tariffs without adequate notice and comment from U.S. industry remains an open question potentially leading to challenge if enacted.

These threats come prior to trade talks which will occur this week in Washington, and are likely intended as additional leverage as China seeks sweeping relief from the current Section 301 tariffs. Markets have already reacted to the new tariff threats this morning which will likely further shape whether these tariffs will become a reality.

The trade community is watching to see if Vice Premier Liu still comes to Washington this week for talks, or if that trip is canceled considering these events.  Past “surprise” tariff announcements have caused China to cancel talks, and these threats could result in a nationalist backlash in China.

Meanwhile the trade community also waits for the USTR to announce an exclusion process for List 3 items currently subject to 10% tariffs.  The USTR had previously indicated that an exclusion process would be forthcoming by the end of April for List 3 which would allow importers to file for relief from the current 10% tariffs. Should the tariff be raised to 25% on May 10, we would expect the USTR would expedite publication of this process.