Uncertainty over tariffs that impose stiff import duties on coffee and tea remains a pressing concern despite word that the US and China are nearing a trade war truce.
Vacillating negotiations between the US-China are the most visible evidence of upheaval but globally a realignment of trade routes and a new round of free trade treaties is already shaping a future that anticipates increased friction in trade.
Under the current administration the US - long a champion of free trade - has erected barriers high enough to generate $7 billion per month in tariffs. These taxes, paid by US consumers, may soon span the entire range of Chinese goods.
In contrast, China and the European Union are lowering tariffs and, in some cases, entirely abandoning barriers to trade.
In June the EU, after two decades of discussions, agreed to phase out tariffs for the Mercosur nations, known as the Southern Common Market, an economic and political bloc comprising Argentina, Brazil, Paraguay, Uruguay, and Venezuela (suspended since 2016). When ratified the treaty will govern the largest free trade agreement in the world, regulating $3.4 trillion in commerce.
The EU has been criticized for aggressively taxing foodstuffs imported from Africa and is now selectively exempting goods from several developing nations.
Graham Stringer, a member of the British House of Commons since 1997, cites as an example the 7.5% tariff the European Union imposes on roasted coffee entering the single market. Germany imports nearly 1.5 million metric tons annually, generating duties that exceed Africa’s entire export revenue from green coffee, he explains. The result is that “people who are growing coffee are kept poor and people in the EU are paying higher prices than we need to,” he said. The EU Common Customs Tariff (CCT) applies to many other finished products that could be processed at origin generating revenue in-country.
Stringer, who campaigned to leave the EU, called CCT “the single greatest mechanism for exporting poverty to the third world, with its high tariffs on foodstuffs.” He is pressing for lower tariffs in the aftermath of Brexit.
“One of the areas that I would like the United Kingdom to explore, as we leave the European Union, is our ability to help those countries to be able to export with added value,” he said. “In other words to trade their way out of poverty rather than depending on aid,” Stringer told the London Daily Express.
After China joined the World Trade Organization (WTO) in 2001 the country lowered tariffs on imports from favored nations, including the US. As the trade war with the US escalated, China strategically rolled back tariffs even further with several of America’s commercial rivals. These include Canada, Japan, and Germany. Since last year China has increased tariffs on US imports to an average 20.7% while lowering tariffs from every other trade partner to an average 6.7%, down from an average 8% as recently as 2018, according to the Peterson Institute for International Economics (PIIE).
This is going to continue. WTO rules permit tariffs “at or below” the bound tariff rates for trade partners. China cut duties on 1,449 consumer goods in July and on Nov. 1 reduced tariffs on 1,585 industrial products, including chemicals and machines.
“China’s two-pronged response means American companies and workers now are at a considerable cost disadvantage relative to both Chinese firms and firms in third countries,” according to PIIE
Despite the rhetoric, China has acted with restraint, imposing tariffs on only 56.3% of US exports, mainly soybeans, wood, paper, and metals. China did not penalize big-ticket trade in US aircraft, oil, autos, and parts. The 15% tariff on Chinese tea, the first in generations, will not harm China’s tea exports but it has certainly hurt US-based tea companies.
Meanwhile, the US intends to impose duties on all remaining Chinese imports beginning in mid-December.