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The Impact of the Coronavirus on U.S. Trade Proceedings


The Impact of the Coronavirus on U.S. Trade Proceedings

The coronavirus (COVID-19) has had an undisputed impact on health and travel around the globe during the past two months. It has also stifled trade with China, where it originated. The pressure from tariffs and the ongoing trade war is beginning to shift to pressure from supply chain disruptions caused by the coronavirus. Importers and manufacturers that source from China have been particularly affected, as have maritime, construction, and global supply chain entities. But as trade with China has taken a hit, how have U.S. agencies handled the administration and enforcement of ongoing proceedings involving China?

Of all U.S. federal agencies with oversight over trade with China, the Department of Commerce (“DOC”) is perhaps the most directly involved. The DOC administers antidumping (“AD”) and countervailing (“CVD”) cases, as well as Section 232 tariffs that target Chinese imports. The Office of the United States Trade Secretary (“USTR”) administers the Section 301 tariffs specifically targeting China.

The virus has had a lesser impact on the administration of Section 232 and Section 301 tariffs because this is handled almost entirely in Washington. However, in AD/CVD cases DOC officials must regularly travel to China to conduct onsite verifications of Chinese producers examined in these proceedings. The DOC is currently overseeing nearly 200 ongoing AD/CVD cases against China. Of these, new investigations require verifications, and in the remaining annual reviews the DOC must verify Chinese producers at least once every three years. Each verification takes at minimum a week and involves two or three officials. That adds up to significant travel to China during an average year.

So how has the DOC been mitigating the impact of the virus on its ability to administer trade remedy proceedings? For one, many AD/CVD verifications have been put on hold indefinitely due to health concerns and because major airlines have suspended flights to China. This can be good or bad depending on which side of the case one is (i.e., U.S. companies that brought the cases vs. the importers that have to pay the duties). If the case is likely to result in high margins, importers and their Chinese suppliers would likely want verification so that they can personally prove to DOC officials that they are not dumping and do not receive illegal subsidies. On the other hand, if the AD/CVD margins are projected to be low, then U.S. producers may want the Chinese producers verified, and conversely the latter would prefer not to be audited.

The DOC has also been generous about granting extensions for submissions to Chinese respondents in AD/CVD cases. The agency recognizes that responses to its questionnaires require access to information which has been difficult for Chinese employees to access. Many of them are in quarantined areas and unable to get to work, let alone respond to DOC’s requests. Chinese legal counsel and accountants that regularly support respondents in DOC’s proceedings also are less able to reach their clients.

The DOC may even consider a less conventional approach – tolling of AD/CVD cases. Tolling would allow for ongoing proceedings to be paused or delayed. There is little precedent for such action in response to a foreign emergency or crisis. The DOC last tolled deadlines in its proceedings during the U.S. government shutdown in January 2019. But that was necessitated by domestic federal government concerns. With the coronavirus, a close comparison could be made to the 2004 Asian tsunami crisis, but that event did not necessitate tolling of DOC’s AD/CVD cases involving shrimp from Thailand and India whose seafood industries were decimated.

The DOC has the discretion to toll its deadlines. However, an action that changes AD/CVD duties would require Congressional approval. Hence pleas for a reduction in such duties would face an uphill effort and encounter resistance from domestic producers (as it did when Thailand asked to have dumping duties on its shrimp reduced after the tsunami).

Although the coronavirus itself appears to have become a non-tariff barrier, the Trump Administration has given no indication of backing off its trade deal reached with China in January. Under the agreement, China promised to increase purchases of U.S. crops and meat products by $20 billion in 2020 in exchange for a reduction or delay on current tariffs. Indeed, in late February, USTR Robert Lighthizer and Agricultural Secretary Sonny Perdue insisted that the Administration will hold China accountable for its commitments, even as the outbreak disrupts global supply lines.


*Mark Ludwikowski is the leader of the International Trade practice of Clark Hill, PLC and is resident in the firm’s Washington D.C. office. He can be reached at 202-640-6680 and

trade war

How Has the Trade War Affected China?

In the last two weeks the stakes in the ongoing trade conflict between the United States and China have increased significantly. After negotiations stalled in July, President Trump expanded his tariff targets to cover nearly all imports from China. But the weapons in this conflict have become increasingly more sophisticated. Beijing retaliated by suspending purchases of U.S. agricultural products and by lowering the value of its currency to make Chinese goods less expensive abroad. In response, the U.S. Treasury named China a currency manipulator and vowed to take actions to eliminate the alleged unfair competitive advantage. In addition, President Trump announced that the United States is not going to do any business with China’s tech giant Huawei. 

While these escalations have recently uneased investors and rattled the markets, they have yet to make an obvious impact on the U.S. economy, albeit U.S. farmers have begun to experience the negative effects of lost sales to China. But how have these actions resonated in China? There are some indicators that the trade war has had an impact on the Chinese economy, as well as public perception in that country. 

At the moment, the U.S. can claim a short term victory, although China appears to be playing the long game. Official reports indicate that Chinese economic growth has decelerated to its slowest pace since 1992, as businesses have held back on investment in light of the ongoing trade tensions with the United States. Also, Chinese exports to the U.S. declined by $5.6 billion in June, versus a $1.8 billion decrease in U.S. exports to China. 

The Trump administration has claimed that its trade policy seeks to remedy problems which have been neglected for too long, and to defend America’s economic interests against perceived abuses by its trade partners. The administration has introduced tariffs as a means to address alleged intellectual property violations by China and a growing trade deficit. Its trade policy takes into account that some pain will need to be absorbed by the United States. However, it is not evident that the U.S. consumer has suffered yet. U.S. importers have to pay the tariffs, and so far many have sough ways to absorb them in whole or in part to minimize any price increases for the consumer. They have also begun to shift sourcing to third countries, including bringing some production to the United States. 

Concurrently, Beijing has implemented a robust domestic stimulus by encouraging banks to relax controls on borrowing and by cutting 2 trillion yuan ($291 billion) in taxes. Furthermore, investment in infrastructure has increased in the first half of the year and Chinese factory output rose 6.3% in June from a year earlier, compared with 5.3% in May. Also, by letting the value of the yuan fall and making Chinese goods cheaper, China has in effect offset some of the impact of the U.S. tariffs – essentially giving the U.S. consumer a tax cut.

The efforts by the Chinese government to lower domestic taxes and support an easier fiscal policy appear to have been, at least temporarily, beneficial to economic growth. If these actions are to be expanded, they may continue to serve as a further stimulus in the second half of this year in areas such as consumption and investment. Although Chinese shipments to the United States have declined, they comprise only about a fifth of its overall exports. By allowing the yuan to fall, China can boost its sales to other countries to offset declines to the United States. 

The trade conflict also does not appear to have had a negative impact on the mindset of the Chinese population at large. Skilled workers and professionals have expressed an open mind to the ongoing trade negotiations, some even welcoming them with a sentiment that “Trump is good for Chinese people” because he has opened up the dialogue between the two countries on trade which in turn has fostered certain welcome reforms in China, as well as tax cuts. Indeed, if Beijing had already planned to institute such measures, then U.S. policy may have provided ample cover for them.

The trade war has also led China to reevaluate existing global alliances, such as those with Japan and Russia. Mending fences with Russia, for instance, is key to the continuation of China’s ambitious “Belt and Road Initiative” of investment and infrastructure projects to connect Asia with Africa and Europe via land and maritime networks. 

With further entrenchment by both sides, and a trade deal increasingly unlikely before next year’s U.S. presidential elections, China appears to be bracing itself for a protracted conflict and may have reason to believe it can “win” if President Trump faces increased political pressures entering the election. As the President recently announced, China may be counting on a Democrat to win the White House to strike a new trade deal. On the other hand, a continuing conflict between two of the world’s greatest economies which has evolved from measures to address intellectual property protection and trade imbalances to currency manipulation, may in the long run lead to recession and hurt growth globally. 

Mark Ludwikowski is the leader of the International Trade practice of Clark Hill, PLC and is resident in the firm’s Washington D.C. office. He can be reached at 202-640-6680 and