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September 3 2018

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FOREIGN TRADE ZONES SPECIAL ADVERTISING SECTION OF THE JOURNAL OF COMMERCE SPECIAL ADVERTISING SECTION OF THE JOURNAL OF COMMERCE LIKE MOST INDUSTRIES in the United States, companies manufacturing and distributing in US foreign trade zones (FTZs) are increasingly impacted by Trump Administration tariffs on an expanding number of imported products under various trade actions — safeguards measures on washing machines and solar cells/panels under Sec. 201 of the Trade Act of 1974; tariffs on Chinese products under Sec. 301 of the 1974 Trade Act; national-security tariffs on steel/ aluminum under Sec. 232 of the Trade Expansion Act of 1962; and possible Sec. 232 tariffs on autos/auto parts. These trade actions are unprecedented in their size and scope — since at least the infamous Smoot- Hawley tariffs in 1930 — and have fueled concerns of an escalating global trade war. Whether inside or outside an FTZ, US companies and their global supply chains are adversely impacted in two ways. First is the significantly higher duty liability from the US tariffs on goods they import as inputs or final products, even when domestic sources are unavailable. Tariffs as high as 25 percent substantially increase the cost of manufacturing and distributing goods in the United States and weaken global competitiveness vis-à-vis companies outside the US that do not bear these additional costs. This situation also undermines FTZ program goals, which are intended to balance tariff treatment and improve the competitiveness of US manufacturing versus imports. The second impact is from retaliatory tariffs and restrictions that other countries are imposing on exports of US goods and services in response to the US trade actions. Retaliation reduces the competitiveness of US goods in major export markets, such as Canada, China, the European Union, and Mexico. This result is significant for US foreign trade zone manufacturers, which account for more than 5 percent of all domestic exports. US trade actions impact FTZ program By Erik Autor September 3 2018 | The Journal of Commerce 51 www.joc.com

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