Biden Budget Tantalizes With Projection of Sharp Drops in Tariff Collection

According to the White House budget, importers are expected to pay $85 billion in tariffs in the current fiscal year, which ends Sept. 30. But the administration projects that duties collections will fall to $57 billion in fiscal year 2022, and to $45 billion in FY23. Alvaro Ferreira, a consultant to Sandler Travis law firm and an economist by training, said he doesn't know what assumptions the Office of Management and Budget used to make its projections, but he thinks "maybe the administration is thinking: Let’s not take the [Section] 301 tariffs for granted, [in case] there’s an adverse court ruling by the Court of International Trade."

A large group of importers is challenging the legality of 25% tariffs on $300 million worth of goods from China, and the additional 7.5% tariff on List 4A (see 2106030039). Ferreira also noted in a phone interview with International Trade Today that businesses are shifting sourcing from China to other Asian countries to avoid the 301 tariffs. "How much of that can be attributed to these projections? I don’t know."

House Ways and Means ranking member Kevin Brady, R-Texas, said that he, too, is curious about what policies might drive the projections. The OMB did not respond to questions by deadline.

Dan Ujczo, a senior counsel in the trade practice of Thompson Hine, said in a phone interview that he was startled when he saw the expected decline in duties "because it's counter to what we're actually experiencing." Ferreira, too, said to himself, "'That can’t be right,' but then I thought about it, that’s a conservative approach, that’s the right way to go." Ferreira said he thinks the Biden administration wants to keep Section 301 tariffs in place, even if its goal is to get rid of the Section 232 tariffs on steel and aluminum.

Collected duties averaged $32.5 billion annually from 2013 through 2017, he said, so the administration is projecting that there will be some duties from the Trump era that will stay. But if tariffs were to fall by $40 billion two years from now, that would please importers, he said.

Ujczo said he believes that the 25% additional tariffs on the products originally identified as relevant to China's technology dominance ambitions aren't ever coming off.