Donald Trump and new duties. Who will pay more for goods

Wojciech Krajewski, customs agent, senior manager at the intermediate tax team at KPMG in Poland: Let's start with the effects for entrepreneurs, i.e. exporters who send goods to the United States. For example, Polish companies producing car parts, food or furniture sent to the USA must take into account that bringing their goods to the United States will cost much more than before. For most goods, the standard duties will be increased by 20 percent. For some car parts, aluminum and steel sent to the US, the duty will amount to 25 percent. American contractors will have to take into account these receivables in prices, and this will cause Polish companies that sell goods to the United States will become much less competitive not only compared to American, but also Turkish or Brazilian enterprises. These countries have obtained better market access conditions. Undoubtedly, this will cause some chaos, at least at the beginning. At the end, however, the cost of Trump's duties will be borne by the inhabitants of the United States. They will have to pay much more for European cars and alcohols, or iPhones produced in China. A 35 % duty was also imposed on this country.

This is the prospect of Polish exporters and American companies and consumers. What does this mean for Polish citizens?

Of course, we will also feel the effects. First of all, goods that will not sell in the United States will have to hit somewhere. Therefore, they can be delivered to the EU market or to other countries such as Canada. The result may be that our market will be “flooded” with such goods, which may mean a drastic breakdown of the prices of some products produced in Poland. We observed a similar phenomenon when Ukrainian grain came to Poland massively.

However, this is not the end of a new accurate puzzle. Because the European Union may impose additional duties on goods imported from the United States.

Yes. We expect that probably in mid -April the EU can introduce retaliation duties. This will cause that many goods that we are currently importing from the United States will be definitely more expensive. Let me remind you that the EU still brings more from the United States than it sends there.

As I understand, the EU retaliation applied to goods from the US can lead to increases, also in Poland, goods such as Levis pants, Nike shoes, Apple phones, Tesla cars, etc.?

Yes. If these goods are covered with European duties, they are actually natural persons, i.e. Polish consumers, will be affected by them, provided that these goods actually come from the USA, and not from China, for example (we will come back to this thread – editor's note). The announcement shows that some American goods may be covered by duties of up to 50 percent. The effect will be that many of the goods we are currently importing from the United States will be much more expensive. And this is just the beginning. Because American duties can launch the domino effect.

Why is this the beginning?

For now, the first block has been overturned, which will cause further effects. If the retaliatory duties appear, the United States can answer it, even more increasing their current rates or blocking access to specific goods to the market. Similarly to the EU, other countries may react, even those that have received the most favorable conditions, because these new customs rates will still be much higher than the previous ones. The spiral of trade war can therefore embrace the whole world. This situation may be significantly influenced by the further outflow of funds from financial markets, a decrease in social moods, approaching elections to the American Congress or the first contract providing for the abolition or reduction of mutual tariffs.

Duty = tax

As I understand, duties basically act the same as taxes.

Dutch is a tax that you have to pay at the time of importing the goods to a given market and allowing it on the market. If we import goods from a third country (e.g. from the USA), we pay the receivables resulting from the customs tariff in force on a given territory, i.e. a list of goods with customs rates assigned to them. As a standard, they amount to a few percent, but in many cases even 0 percent. Raising them to 20-25 or more percent is a huge jump, which causes a significant increase in costs and reducing the availability of these goods on the market. Of course, customs pays the entrepreneur who imports goods, but in practice transfers this cost to another entity in a transaction or a natural person who will ultimately buy this product. So Trump talks about limiting the deficit in trade with other countries, but in fact it works to the detriment of ordinary Americans.

Are the Polish consumer also threaten to increase? Do you have to hurry with purchases of goods from the USA?

If a person or company brings some goods from the United States, today there is a moment to buy them at old prices. In a few weeks the situation can change drastically.

Important origin of the goods, and not where it was produced

On what basis duties are determined. You said that the origin of the goods is important.

The duty is determined on the basis of a tariff classification, i.e. a code assigned to a specific product, as well as its customs value and origin. This last parameter is crucial in this case. The fact of delivering goods from a given country does not mean that it comes from from customs. This should be considered in the light resulting from customs rules of origin, which often relate to the principles of production or participation of the components used. In practice, this means that if a company from the European Union will send goods to the United States with confirmed Chinese origin, the customs rate will apply to Chinese goods, i.e. 35 percent, not 20 percent. or 25 percent (rates appropriate for EU goods).

So if the European Union introduces retaliation, it is worth checking: what is the origin of the goods, what is the tariff classification and as a result whether it has been covered by additional receivables, because it will not always be so.

This is probably good news for Polish consumers? If the American company sells a Polish consumer to the Polish consumer, which was produced in China (it comes from your Middle Kingdom), then there will probably be no increases in prices for this product?

If the American supplier will sell Chinese goods to Poland or to the European Union, they probably will not be covered by these additional receivables.

However, it should be remembered that although it is loud about what is happening in the USA currently, the European Union's relations with China are currently tense. Last year, the European Commission conducted several dozen anti -dumping proceedings regarding Chinese goods, such as electric cars, floor panels, or decorative paper, which ended with the introduction of several dozen percent, and even several hundred percent duties. Although their basic assumption is to protect EU producers against unfair competition, selling goods below the production costs. In practice, however, these duties hit many other industries using cheaper materials and components.

Of course, currently a group of goods that are covered by higher duties is not as large as it can be after the last movement of the United States. According to current announcements, hundreds of goods may be covered by retaliation. This will cause further tightening of tensions and increasing prices for ordinary citizens, whether EU or American.

How entrepreneurs can defend themselves against high duties

Let's go back to entrepreneurs. How can they defend themselves against customs?

In addition to the already mentioned verification of the tariff classification and the origin of goods, I would also undoubtedly pay attention to the provisions of the liability contracts for payment of receivables. Usually, this obligation rests with the recipient of goods, but when the duties were at zero or even a few percent are established conditions, even in the form of Incoterms, they could not have such an meaning. Due to an unfavorable change in the situation, many entities may now consider changing these provisions or abandoning the implementation of the contract on the basis of provisions regarding the so -called force majeure.

Finally, entrepreneurs must be aware that customs regulations in the European Union provide for favorable solutions that allow you to completely avoid or at least postpone the payment of customs. For example, it is about the procedure for refining active, final purpose or customs storage.