With Chinese Officials in Washington, Tariffs Hang in the BalanceApril 4th, 2019 by Drew Vass
As Chinese officials visit Washington, D.C., this week to resume talks of trade, U.S.-based manufacturers await further details regarding any potential agreements. With tariffs on materials used in door and window products hanging in the balance, manufacturers hold a hopeful eye on the situation, expecting to at least dodge increases.
“It was the most recent list—List Three—of Chinese products that were subjected to the 10 percent tariff, with the possibility of increasing to 25 percent,” explains Kevin McKenney, director of government affairs for the Window and Door Manufacturers Association (WDMA). “At this point, our expectation is that those products will remain at 10 percent, while discussions continue with the Chinese government.”
Both sides have cited progress toward a deal, McKenney reports, “but we will have to wait and see what the final results are and whether they can reach an agreement,” he adds.
The history of recent U.S. trade wars dates back to 2010, when the U.S. Department of Commerce imposed anti-dumping and countervailing duties on imports of aluminum extrusions from China. The idea was to give domestic extruders a shot at gaining market share, and there were indications of success. In 2018, however, similar tactics escalated into an all-out trade war, with more or less every foreign trade partner. As a result, in September 2018, the balance of U.S. exports/imports with China tipped beyond the negative $40 billion mark for the first time ever.
“Tariffs can sometimes have the desired effect, as long as there is a short-term application of them,” says Chris Dimou, president and CEO of Roto Frank of America Inc. On the other hand, he says, mid- and long-term tariffs often have posted negative net impacts on the U.S. economy. “Ideally, when one applies tariffs as a mechanism of pressure, it should be within a multilateral alliance of countries,” he adds.
Dimou had the opportunity to express those thoughts recently with U.S. Representative Joe Courtney from Connecticut’s second district, amid a visit the Congressman paid to Roto’s manufacturing plant.
More than a year ago (in March 2018), the current administration announced that it would employ Section 232 of the Trade Expansion Act (passed in 1962, allowing tariffs to be imposed by a president when imports are deemed damaging to national security), imposing tariffs on aluminum and steel imports of 10 and 25 percent, respectively. Shortly thereafter, Canada slapped retaliatory tariffs on U.S.-produced steel and aluminum, and a host of other products, including a 10-percent surcharge on aluminum doors, door thresholds and windows. Increases to 25 percent set to take effect January 1, 2019, were later deferred in hopes of further negotiations. Based on his discussions with Congressman Courtney, Dimou says he expects those tariffs will remain at 10 percent. Even without increases, however, he says that the current rates pose challenges for U.S.-based manufacturers.
“Although we manufacture in North America, the 10 percent tariff has impacted us, along with the rest of the industry, as almost everyone purchases components from China,” Dimou says. The Congressman, he says, promised to shoulder initiatives aimed at mitigating those impacts.
“This is a very complicated matter, because it touches on various topics in the bilateral trade relationship between the U.S. and China,” Dimou says, including intellectual properties and trade imbalances. “Our position has always been to let the markets sort things out, as long as the treatment between industries and sectors is equitable,” he adds. “And therefore, it is certainly our hope that relations will fade back to a friendlier status.”
In the meantime, officials for WDMA say they’re focusing on the exclusion request process for door- and window-related List Three products, while urging the U.S. Trade Representative’s Office (USTR) to officially accepting those requests.
“WDMA members utilize several of these products in the manufacture of windows, doors and skylights, and we will continue to engage with USTR to ensure our members are not adversely affected,” McKenney says.