In mid-February, the United States import tax on approximately $75 million in Chinese tea will be lowered to 7.5%, a reduction by half since duties were first imposed in September 2019.
Specific details have yet to be disclosed, but tariffs on coffee and tea, will be lowered as part of the Phase 1 agreement signed Jan. 15. The lower rates are effective on February 14.
Last September, brokers had little choice but to pay duties and pass along the 15% expense to retailers, most of whom increased prices.
Tariffs impact more than just the tea. According to the article in World Trade News, “import duties on packaging materials cost Bigelow Tea $1 million last year.” Companies including Harney & Sons, sought packaging options outside China. It became less expensive to package through U.S. firms using materials from countries not subject to tariffs.
China has no incentive to lower prices. The US imports less than 1% of the total Chinese tea production. Most of their tea is used within China and worldwide demand makes their best teas difficult to find.
Although the 50% reduction is significant, the 7.5% remaining tariff is still sizable considering that prior to the current trade war, there were no tariffs on tea.
The Phase One reduction is scheduled for mid-February. The future of tariffs on tea is unknown as the reduction will be dependent on substantial and expanded imports by China. There is not high confidence that China will be able to achieve the levels. However, there is doubt that the U.S. will increase tariffs during an election year.