New data shows the almost-year-long trade war is pushing companies to source more from Generalized System of Preferences countries such as India, Thailand, Cambodia, Indonesia and Turkey. The data shows that the Generalized System of Preferences saved American companies $105 million in March, an increase of $28 million or 36 percent from March 2018 and the second-best level on record. In the first quarter of 2019, the Generalized System of Preferences saved American companies $285 million. That’s $63 million more than the first quarter of 2018 – itself a record-shattering year.
Products hit by Section 301 tariffs when imported from China account for 90 percent of increased Generalized System of Preferences imports in 2019. Overall those imports increased by about $760 million, with $672 million coming on products on China Section 301 lists. Generalized System of Preferences imports of products on those Section 301 lists increased 19 percent, while imports of other products increased by just 5 percent.
That data shows that the Generalized System of Preferences provides an alternative to sourcing from China, something we’ve heard again and again from U.S. businesses. The May 10 increase in tariffs on $200 billion in imports from China – and new tariffs on the remaining $300 billion in imports that could come soon – will only accelerate that trend.
Terminating the Generalized System of Preferences for India, Turkey or others under review would hurt many American businesses and workers that have relied on the system for years. It would also reduce viable sourcing options for companies looking to buy less from China in response to Section 301 tariffs – thereby undermining the administration’s objectives.
Now is not the time to limit the ability of American businesses to import from Generalized System of Preferences countries duty-free. In the midst of an escalating trade war with China, President Donald Trump has encouraged companies to import from “non-tariffed” countries. The Generalized System of Preferences for countries like India and Turkey helps make that possible.
As shown in data from the Coalition for GSP, imports from China subject to new tariffs have decreased significantly. The chart shows countries from which Generalized System of Preferences imports of products on China Section 301 lists have increased the most in first-quarter 2019.