May 13, 2019 US tariffs on Chinese imports will have little effect on commodity prices overall but larger effect based on industry A quantitative assessment using the EY Tariff Modeling Tool (EYTMT) shows that the US imposition of tariffs on Chinese imports will have little effect on domestic commodity prices overall but will affect prices in some industries more than others (Table 1). On average, prices will increase by 0.16% due to (i) the 25% tariff on $50 billion of Chinese imports, and (ii) the additional 25% tariff on $200 billion of other Chinese imports, which was applied into two rounds of successive tariff increases of 10% and 15%.1 The tariffs' impact is larger for US-produced commodities that highly depend on the affected Chinese imports. As a result, price increases for products such as upholstered household furniture would be as high as 2.45%. (Table 2). The US tariffs would generate $62.5 billion of revenues ($12.5 billion from the $50 billion of Chinese imports and $50 billion from the $200 billion of other Chinese imports). Companies that are involved in US-China trade are encouraged to determine the extent to which their products and associated production costs could be affected, and develop appropriate mitigation strategies, such as identifying alternative sourcing options. ———————————————
——————————————— ENDNOTE 1 The $50 billion and $200 billion Chinese imports refer to the values of Chinese commodities that were previously identified by the United States Trade Representative and became subject to additional ad valorem punitive tariffs. The 15% tariff became effective Friday May 10, 2019, at 12.01 a.m. ET. For details on these tariffs, see the Tax Alerts 2018-1848, 2018-2386, 2019-0021, 2019-0477, 2019-0608, 2019-0608, 2019-0892 and 2019-0906, and the attachments to this Alert. ——————————————— Chinese goods subject to additional duty US tariffs on Chinese imports imminent US announces tariffs on China-origin goods | |||||||||||||||||