The China/Section 301 diversion is real. So far in 2021, GSP imports are up 12% for products where Chinese imports face Section 301 tariffs but down 7% for products where Chinese imports don’t face any new Section 301 tariffs. It is impossible to know how much more GSP imports might be up (or Chinese imports down) if GSP expiration hadn’t forced American companies to pay tariffs for those products too. We wrote about how GSP renewal must be a part of any “China trade” conversation here.

Imports into 38 states (plus Puerto Rico) paid at least $1 million in tariffs due to GSP expiration. The map below shows estimated tariffs paid for products claiming GSP by state.

It is critical that Congress renew GSP – with refunds for tariffs paid – as soon as possible. We strongly encourage GSP importers hurt by expiration to answer our new survey here. As always, no company-specific details will be published without permission.

In the first five months of expiration, American companies paid at least $397 million in extra taxes as a result of GSP expiration. Companies in 32 states paid at least $1 million in tariffs from January-May 2021 due to GSP expiration. The map below shows estimated tariffs for products claiming GSP paid by state in that period.

May was the most expensive month of GSP expiration yet both nationally and for 19 states: Alabama, Colorado, Delaware, Georgia, Hawaii, Illinois, Kansas, Massachusetts, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Pennsylvania, South Carolina, and Virginia. In three states – Colorado, Kansas, and New Mexico – tariffs paid in May were at least double any of the previous four months.

While many believe the United States has low tariffs, Colorado companies have paid extra tariffs averaging 11.7% due to GSP expiration. Companies in Maine, Montana, New Hampshire, Utah, and Wisconsin have all paid extra tariffs average 7-10%.

The data on tariffs paid is a conservative estimate, and the real figure likely is higher. Why? Estimates only capture products that continued to claim GSP despite expiration. Yet imports of many products that traditionally get GSP have not claimed it in 2021. Tariffs paid on those imports still would be eligible for refunds in the event of a retroactive renewal, but importers would need to file manual requests.

It is critical that Congress renew GSP – with refunds for tariffs paid – as soon as possible. Companies that want to help the Coalition for GSP educate policymakers on who is hurt by expiration (and how) should:

• join the Coalition for GSP
• add their name to the free GSP supporter list
• answer our very short survey on GSP expiration impacts to date

California accounts for more than a quarter of GSP savings, more than the next 3 states – New York, Florida, Texas – combined. Georgia, New Jersey, Ohio, Illinois, Washington, and Pennsylvania round out the top 10 states for GSP savings in 2020.

Estimated GSP savings for Colorado grew from $4 million in 2019 to $14 million in 2020, by far the largest increase. Estimated GSP savings also grew in Wisconsin (+$869,000), Arkansas (+$478,000), Washington (+$300,000), Delaware (+$73,000), and Wyoming (+$34,000). Estimated savings fell in all other states.

While Covid-19 had big impacts on GSP imports in the spring, declines were largely due to country suspensions. Excluding products impacted by country suspensions (e.g., India, Turkey, Thailand), most states’ GSP savings grew. For example, New York’s GSP savings grew by $15 million on non-impacted products but fell by $2.5 million overall due to country suspensions. Similarly, Texas’ savings GSP by $9 million on non-impacted products but fell by over $7 million overall.

Since GSP expired on December 31, American likely have paid about $110 million in tariffs that previously would’ve been “GSP savings.” It is critical that Congress renew GSP – with refunds for tariffs paid – as soon as possible. To help the Coalition for GSP educate policymakers on who is hurt by expiration (and how), companies are strongly encouraged to:

• join the Coalition for GSP
• add their name to the free GSP supporter list
• answer our very short survey on GSP expiration impacts to date

To be clear: they’re not paid by the countries and haven’t achieved any other U.S. policy goals and won’t be refunded if benefits are reinstated. They’re just $500 million in new taxes on U.S. companies at a time of unprecedented economic collapse and job losses.

Above is the breakdown of estimated tariffs paid by state. Imports into California and New Jersey have faced about $50 million in new tariffs each. Companies in traditional – or newfound – election battleground states Texas, Georgia, Florida, Pennsylvania, Michigan, and Ohio were all in the top 10 of tariffs paid, collectively paying up to $168 million in extra taxes.

And the taxes paid continue to climb.

The bulk of taxes – up to $366 million from June 2019 to August 2020 – have been paid on imports from India. The typical GSP importer from India had 14 employees and saved $100,000 per year. The burden falls overwhelmingly on small businesses struggling to make it through the pandemic, not the large multinational that can rapidly shift sourcing to suppliers in other countries. A report from April 2019 profiled many U.S. companies that would be hurt by termination for India (and others).

Up to $111 million in tariffs have been paid on imports from Turkey from May 2019 to August 2020. In similar comments submitted as part of the Turkey review, we noted the typical GSP importer from Turkey had 14 employees and saved about $150,000 annually. The Turkey review was launched over “market access” issues, but there were no known discussions about resolving issues. Instead, Turkey was “graduated” for sufficient economic development despite just entered a recession and having a GDP per capita that has now fallen in 5 consecutive years (the metric used to determine if countries should be graduated from GSP automatically).

Up to $23 million in tariffs have been paid on imports from Thailand from May 2020 to August 2020. Importers from Thailand tend to be a little bigger – but far from large! – with the typical importer having 28 employees and savings $183,000 annually under GSP. Most unhelpfully, the product facing the most tariffs appear to be face masks. Higher tariffs on face masks may not have seemed like a big deal when Thailand’s partial suspension was announced in October 2019, but we’re in a very different world with mask imports surging due Covid-19.

Potential GSP renewal legislation is highly unlikely to address country-specific issues, but the impacts from terminations are no less real for American companies than the prospects of expiration. If Congress considers changes to the GSP programs in the future, ensuring importers interests are not ignored in the country review processes should be a top priority.

While California is far-and-away the #1 state for GSP savings, Texas edges it out for most tariffs paid this year due to country suspensions – companies in each state have paid up to $18.6 million in extra taxes. Companies in New Jersey are not far behind, having paid up to $18.2 million in extra taxes due to country suspensions.

The costs are driven by different Trump administration actions. Texas is the top state in tariffs paid due to India’s suspension, New Jersey has paid the most due to Turkey’s suspension, and California has paid the most due to Thailand’s partial suspension. The table at the very bottom shows tariffs paid, by country suspension and total, for all states.

Including the tariffs paid due to suspensions, both in 2019 and 2020, drastically changes the state savings trends. Instead of the sea of dark red states with declines of over 20% shown yesterday (and below, right), only a 5 states are likely to have seen such declines without country suspensions. Similarly, there would be savings growth for states in every region of the country instead of limited to the Mountain West.

Swings states, including big states not traditionally in play in Presidential or Senate elections, account for some of the biggest dollar swings. Without country suspensions:

• Texas companies’ savings would’ve increased up to $2.4 million instead of declining by $12.7 million, a $15+ million swing
• Georgia companies’ savings would’ve increased up to $3.1 million instead of declining by $5.8 million, nearly a $9 million swing

In more traditional swings states, maintaining full GSP eligibility for all countries would have mitigated declines likely associated with the Covid-19 pandemic. For example:

• Florida companies’ savings would’ve declined by $4.3 million instead of $12.6 million, an $8+ million swing
• Pennsylvania companies’ savings would’ve declined by $350,000 instead of $8.2 million, nearly an $8 million swing
• Michigan companies’ savings would’ve declined by $3.2 million instead of $8.2 million, an $5+ million swing

Swings were even bigger on a percentage basis in states where GSP savings are traditionally lower:

• Instead of declining by 47%, New Mexico companies’ savings would’ve increased by up to 161%, a 200+ percentage point swing
• Instead of declining by 60%, Minnesota companies’ savings would’ve increased by up to 17%, nearly an 80 percentage point swing

These are real costs to real American companies and workers – many in places that will be hotly contested in the 2020 elections – on top of the challenges related to the Covid-19 pandemic and economic fallout. In addition to congressional reauthorization of GSP, administration decisions to restore lost GSP eligibility would provide significant benefits to struggling American companies.

The top states by GSP savings have been fairly consistent over the years. California accounts for more than a quarter of GSP savings – about as much as the next 4 states (Florida, New York, Texas, New Jersey) combined. Washington and Tennessee have moved into the top 10 states in 2020, replacing Pennsylvania and North Carolina.

Savings are down sharply, from $555 million in 2019 to $407 million in 2020. The map below shows the widespread declines, with the Mountain West being a notable exception. Washington, Idaho, Wyoming, Utah, Colorado, and Arizona form a string of growth states from the Canadian to Mexican borders. Colorado’s savings increased over 150% from 2019, largely driven by a jump in backpack imports. Massachusetts is the only other state where GSP savings are up in the first half of 2020.

Savings declined by over 40% in more than 20 states, including a whopping 78% in Vermont. GSP savings also declined by 67% in Montana and Oklahoma, 63% in North Dakota, 61% in Michigan, 60% in Minnesota, and 52% in West Virginia.

Declines are NOT due to Covid-19. American companies have paid up to $183 million in extra tariffs in 2020 due to GSP suspensions for India, Turkey, and Thailand. In the first half of 2019, tariffs paid due to suspensions (India and Turkey only) were about $35 million. Add those potential savings to actual savings in both years, and the first half totals were nearly identical ($590 million) in spite of Covid-19-related declines. Our next post will dig into state-by-state costs in 2020 associated with the suspensions.

In a major shift from 2018, consumer goods were the largest category of GSP imports by both value ($6.6 billion) and savings ($512 million). Consumers goods accounted for 32% of total GSP imports, up from 24% the prior year. Because average tariffs (without GSP) are much higher (7.7%), consumer goods accounted for about half of all GSP savings. Expanding GSP to cover travel goods in 2016/2017 has led to steadily increasing consumer goods imports over the last several year.

Industrial materials ranked second among GSP products both by import value ($6.0 billion) and estimated tariff savings ($256 million). Industrial materials were the largest GSP imports, usually by a wide margin, in each of the last 10 years. The reason industrial materials slipped to #2 is clear from the “top countries”: 5 months of GSP for India eliminated more tariffs on materials used by American manufacturers than full-year GSP for any other country.

Agricultural and food products ranked third among GSP products by import value ($2.9 billion) and estimated tariff savings ($116 million). Among the more surprising data points: Ecuador was the second-largest source of food and agricultural products in 2019 by the value of GSP savings, primarily on tropical plants such as taro, mangoes, and guavas.

Capital goods ranked fourth among GSP imports by value ($2.8 billion) and savings ($83 million) in 2019. Despite similar import values, GSP savings on capital goods were much lower than GSP savings on agricultural and food products due to lower average tariff rates (3.0% versus 4.0%, respectively). India was the second-biggest source country in terms of tariff saving on capital goods, again demonstrating how American manufacturers are bearing the brunt of the decision to end GSP for India.

Autos and parts ranked fifth among GSP imports by value ($2.3 billion) and savings ($66 million) in 2019. Passenger vehicles are not eligible for GSP, so imports tend to be concentrated among parts such as engines, tires, and wire harnesses. Not surprisingly, states with a heavy automotive presence such as Michigan and Tennessee are among the top importers by GSP savings on these components and parts.

GSP’s current authorization expires on December 31, 2020, and Congress must pass legislation renewing GSP this year for benefits to continue into 2021 and beyond. Companies that want GSP renewed should add their name to the free GSP supporter list.

By GSP savings, California was far and away the largest GSP beneficiary. California’s estimated $270 million in tariffs waved was nearly as much as the next four largest states – Florida, New York, Texas, New Jersey – combined.

While overall savings levels were lower, imports into Montana and Maine would face the highest average tariffs without GSP (10.9% and 10.6%, respectively). The high average tariff waived results from the dominance of travel goods imports, which can face tariffs up to 20.0% without GSP. GSP waives tariffs averaging about 7.0% on imports into Utah, Wisconsin, Arizona, and Colorado, well above the 5.0% national average.

U.S. companies saved about $180 million in tariffs on imports from Thailand – more than any other country – though GSP eligibility for about 1/3 of imports its products were removed in April 2020. Cambodia was the second most important country for U.S. savings at $169 million, following by Indonesia at $150 million. Despite being GSP-eligible for only 5 months, India was the fourth-most important country in terms of savings at $121 million. Like the states, countries such as Burma and Cambodia where travel goods are most important GSP products had the highest average tariffs waived.

Even before upward revisions, U.S. companies’ tax benefits from GSP showed massive increases from past years: American companies saved nearly $20 million per month more in 2017 because of GSP compared to just two years earlier.

Through the first half of 2018, GSP savings are up an additional 18 percent and on track to crack $1 billion for the year. While Congress renewed GSP through 2020 to give companies the certainty necessary to encourage such growth, the Trump administration has launched a number of country “eligibility reviews” that could raise taxes for American companies that depend on GSP – by a lot.

There are GSP reviews underway for India, Indonesia, Kazakhstan, Thailand, and Turkey. American companies saved $544 million last year due to GSP for those countries. Collectively, they accounted for 61 percent of GSP savings on imports from all countries.

Given the risk of lost GSP, we strongly encourage companies importing from those countries to sign up for our GSP supporter list and take our review impacts survey, which are both free.

In terms of specific revisions based on the new data, New Jersey saw the biggest jump in savings by value, followed by Florida, California, Georgia, and New York.

Montana saw the biggest jump in GSP savings by percent, followed by Utah, Maine, Florida, and Nevada.

For supplier countries, the largest revision in US savings came on imports from the Philippines, followed by Indonesia, India, Thailand, and Brazil.

Some states such as Georgia and North Carolina saw much larger increases in GSP imports and savings compared to the previous year, as shown in the graphic below.

GSP saved Georgia companies $3.9 million in December, up $1.3 million (49 percent) compared to one year earlier. Metal products from Brazil, luggage from Thailand,  and chemicals from India contributed the most to Georgia’s GSP savings increases.

GSP saved North Carolina companies $2.0 million in December, up $577,000 (39 percent) compared to one year earlier. Chemicals from the Philippines, furniture fittings from Thailand, and wood products from Indonesia contributed most to North Carolina’s GSP increases.

In addition to Georgia and North Carolina, companies in 26 other states saw GSP savings increase by at least 20 percent, including: California, Connecticut, Florida, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, and Wyoming.

Savings on GSP imports from Indonesia increased by 31 percent compared to December of last year. California companies’ alone imported $4.6 million in silver jewelry under GSP in December. GSP eliminated about $1.5 million in import taxes on mangoes and guavas in December. About two-thirds of those savings were on imports into New Jersey.

*** REMINDER: GSP EXPIRED EFFECTIVE JANUARY 1.***

The House passed GSP renewal legislation in February, but the Senate must pass legislation for GSP benefits to resume. Please use our Contact Congress tool to write your Senators about GSP renewal; answer our brief survey on how GSP expiration impacts you, and/or sign up for the free GSP supporter list to show the broad support for renewal.