Section 301 Tariffs May Be Boosting GSP Imports, Coalition Says
There's been some significant growth in imports of products eligible for Generalized System of Preferences benefits in recent months, the Coalition for GSP said in a blog post. The coalition, which advocates for keeping the GSP program in place and is run by a consultancy called Trade Partnership Worldwide, said October set another record for GSP imports. The GSP benefits in October saved U.S. companies $105 million, an increase of $12 million, or 13 percent, over the previous record set in August, the group said.
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There are likely multiple factors involved in the growth, including the GSP renewal in March (see 1803230028). But the "uncertainty about tariffs on imports from China may have as much to do with the October savings jump as the certainty provided by GSP renewal," the Coalition said. The increase may involve some shifting of supply chains away from China, the group said. The GSP "countries compete directly with China on many of the covered products," it said. "In fact, nearly 70% of GSP imports in 2018 are products included on one of those lists. October was a banner month for GSP imports of products now subject to additional 10-25% tariffs on imports from China." Although imports of GSP goods not on any of the Section 301 tariff lists also grew, that growth was a more "middle-of-the-pack result" compared to the imports on the tariff lists, it said.
Much remains unclear in terms of a lasting impact on GSP, it said. "It is hard to draw too many conclusions from one month of data," the group said. "GSP increases of Section 301 products could be an anomaly, part of a several-month bump, or the start of a long-term sourcing shift from suppliers in China to competitors in GSP countries."
One potential issue that could impede future growth is the Trump administration's ongoing review of benefits for GSP countries, including Turkey (see 1808150013), Thailand (see 1805290063) and India (see 1710240043). "The uncertainty about future GSP benefits may discourage companies from identifying and qualifying new suppliers in GSP countries. After all, who wants to spend the time and money to find suppliers that also may see tariff hikes in the near future?" The Office of the U.S. Trade Representative also recently denied a wide range of waiver requests that would have increased duty preferences (see 1810300031).