U.S. Grants Tariff Exemptions for More Medical Goods From China

Date: Monday, March 16, 2020
Source: The Wall Street Journal

Reversal on tariffs comes amid worsening coronavirus crisis

WASHINGTON—In an about-face, U.S. trade officials removed tariffs on dozens of medical items imported from China amid the coronavirus crisis—including some protective gowns, exam gloves, patient bags, surgical drapes and medical waste disposal bags.

U.S. trade officials had previously ruled that these items couldn’t get exemptions.

The move comes even as the Trump administration has resisted calls to provide broad tariff relief during the spreading coronavirus pandemic. Despite the reversals, many medical items remain under tariff.

Executives from the medical supply industry had testified to the U.S. Trade Representative in a series of public hearings that such items could be essential during a disease epidemic.

Each tranche of USTR tariffs has hit some medical devices. The items for which exclusion decisions were reversed were all items on the third-tranche of tariffs, which covered a total of roughly $200 billion a year of imports from China. The tariffs on these items were first imposed in September of 2018 at 10% and since raised to 25%.

The majority of the tariff reversals cover items with a direct medical use. But the USTR also reversed previous denials on more general items such as plastic food bags, trash bags and dog waste litter bags.

“We are grateful that the administration granted these important healthcare exclusion requests,” Medline Industries Inc. of Northfield, Ill., said in a statement. The company had 13 of its previously denied requests for exclusions reversed by the USTR.

In a statement, the U.S. Trade Representative said its decision was “based on factors set out in the Federal Register and takes into account advice from advisory committees and public comments on the pertinent exclusion requests.”

“As it has throughout the exclusion process, the U.S. Trade Representative will continue to issue decisions on pending requests on a periodic basis,” said the statement from Jeff Emerson, a USTR spokesman.

The Journal reported last week that the USTR was granting tariff exemptions for face masks and other products hit by the most recent tranche of tariffs.

The new exemptions, granted Thursday, are for items that were part of an earlier round of tariffs. Many of the companies that manufacture such devices submitted requests to the USTR last summer and fall, requesting relief from the tariffs for medical items. The USTRdenied most of their requests within about a month.

Even with about 60 of those decisions now reversed, tariffs remain on many medical items, including high-tech equipment and components to systems such as ultrasound machines, patient monitors, X-ray devices, defibrillators and electro cardiograms.

The reversals “effectively acknowledged that trade wars can endanger public health [but] covered only a handful of urgently needed products,” said Chad Bown, a senior fellow and trade policy expert at the Peterson Institute for International Economics.

An analysis from Mr. Bown, published on Friday, calculated that the Trump administration’s tariffs originally applied to about $5 billion of medical goods imported from China. Data on how much trade was covered by the exclusions granted on Thursday wasn’t immediately available.

“Now that there are potential supply shortages globally, the U.S. health crisis demands that the administration comprehensively and permanently reverse these policies of self-harm,” Mr. Bown said.

Continuing to maintain tariffs on medical supplies during a global pandemic is a poorly timed use of the trade powers, according to industry executives.

“Obviously this is nuts,” said Ken Rogoff, a professor of public policy and economics at Harvard University, and a former chief economist at the International Monetary Fund.

“This just isn’t the moment because we have the coronavirus, which cuts off world communication and trade more than any tariff is going to do,” said Mr. Rogoff. “The last thing on earth we need to do is add frictions to that.”

Tariffs on medical supplies right now are “a pressure. It’s a delicate balance and when you increase pressure it’s a risk to the health-care supply chain,” said Khatereh Calleja, the president of the Healthcare Supply Chain Association, in an interview on Thursday. “We would continue to encourage a review of the lit to make sure we’re not adding undue pressure.”

The USTR also issued exclusions for 11 items under the $120 billion fourth tranche of tariffs. Those included absorbent puppy pads, safety goggles and lens-cleaning wipes.

 

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