This market trends article identifies disclosures related to U.S. Tariff Policies that offer detailed discussions on the actual and potential effects for the particular registrants and concludes with recommendations on how to enhance disclosures relating to the effects of U.S. Tariff Policies. The company name, its industry, and the type of filing are also provided in each sample disclosure for reference.

For a discussion of the effects of certain policies of the current U.S. administration in other contexts, see Market Trends 2018/19: High Yield Debt Offerings — Market Outlook and Clean and Renewable Energy Industry Guide for Capital Markets. For other market trends articles covering various capital markets and corporate governance topics, see Market Trends

Since January 2018, the U.S. administration has imposed a series of tariff policies (U.S. Tariff Policies) that potentially have a wide range of consequences to domestic and international trade and the capital markets. In a period marked by increased globalization and international trade, the uncertainties brought about by aggressive tariff policies are leaving companies and investors wary of the direct and indirect consequences of such measures. As U.S. Tariff Policies continue to evolve, and as uncertainty looms, companies must disclose the effects of these policies on their businesses.

In January 2018, the U.S. administration imposed tariffs on solar panels produced outside of the United States, adversely affecting renewable energy companies. Shortly thereafter, the Office of the U.S. Trade Representative (USTR) announced tariffs on foreign washing machines. In March 2018, President Trump signed an order imposing a 25% tariff on steel and a 10% tariff on aluminum imports. As a consequence of the steel and aluminum tariffs, some economists and business leaders have warned of job losses, impacts on industrial competitiveness, and higher costs for businesses and consumers. For example, Coca-Cola and Pepsi have reported U.S. tariffs as a factor leading to increased costs of the product for consumers. President Trump has hiked tariffs on goods and services primarily from China, Canada, Mexico, and the European Union (EU), prompting a wave of retaliation that has the potential to negatively impact American exports of everything from pork and soybeans to Levi's jeans. Some U.S. Tariff Policies have and may continue to incite "tariff wars" between the United States and various countries throughout the world, which may negatively impact shipping and trading products within and outside of the United States. In August 2018, President Trump authorized double tariffs on aluminum and steel against Turkey. By year-end 2018, the U.S. administration imposed tariffs that affect approximately 12% of total U.S. imports.

In April 2019, the U.S. administration had imposed three rounds of tariffs on Chinese goods, totaling over $250 billion with duties ranging from 10%–25%. The U.S. administration threatened to levy an additional $267 billion worth of Chinese goods that would cover virtually all Chinese imports. The U.S. administration delayed the March 1, 2019, deadline that would raise tariffs from 10%–25% on $200 billion worth of Chinese goods. In April 2019, President Trump threatened to tariff all cars made in Mexico and sold in the United States at 25%. Similarly, in April 2019, President Trump continued to threaten to enact tariffs up to 25% against EU cars and auto parts.

In April 2019, China had imposed retaliatory tariffs on approximately $110 billion in U.S. goods targeting important industries such as agriculture. In June 2018, the European Commission imposed tariffs on approximately $3.5 billion worth of U.S. goods and reported in January 2019 that they are prepared to tariff over $23 billion worth of U.S. goods should the U.S. follow through with its threatened tariffs against EU cars and auto parts. In July 2018, Mexico and Canada imposed over $3 billion and $13 billion, respectively, in levies on U.S. exports. In April 2019, Mexico and Canada threatened not to ratify the United States-Mexico-Canada Agreement (USMCA) until Mexican and Canadian steel and aluminum tariffs are lifted. Although the present U.S. administration reasons that U.S. Tariff Policies are necessary to protect manufacturers in the United States, these policies can exacerbate trade tensions with other nations and prompt retaliatory trade measures. On October 18, 2019, the United States imposed 10% and 25% tariffs on $7.5 billion goods from the European Union. It further threatened a tariff on $2.4 billion in French products in December 2019.

On August 23, 2019, the United States announced a 15% tariff on $300 billion Chinese goods, with some to begin on September 1, 2019, and others on December 15, 2019. China announced an additional 5%–10% retaliatory tariff on $75 billion of U.S. imports that began on September 1, 2019, and ended on December 15, 2019, with an additional tariff on U.S. cars and car parts. On September 12, 2019, the United States announced a 30% tariff on $250 billion of Chinese goods would become effective from October 1, 2019, until October 15, 2019. In December 2019, the U.S. administration postponed indefinitely the 15% tariff on $160 billion of goods from China, with plans to decrease the tariff to 7.5% on $120 billion worth of goods as part of the "phase one" deal between the two countries. China simultaneously canceled its scheduled tariff increase on approximately $75 billion of U.S. goods. These changes took effect on February 14, 2020.

As of April 2020, the U.S. administration announced its intention to impose tariffs on crude imports to protect the U.S. energy industry, following the crash of the price of oil. The United States has lifted steel and aluminum tariffs on Canada and Mexico. The USMCA was signed into law by President Trump on January 29, 2020, and is expected to go into effect by July 1, 2020, at the earliest. The USTR office has granted Section 301 tariff exclusions for certain medical products from China, including medical masks, examination gloves, and antiseptic wipes, in response to the coronavirus pandemic, but the U.S. administration does not plan to lift additional import tariffs on Chinese goods. The U.S. administration signed a plan to defer U.S. tariffs on goods from countries with most-favored-nation status for 90 days in response to the coronavirus pandemic.

Disclosures on U.S. Tariff Policies Contained in the Risk Factors Section

Item 503(c) (17 C.F.R. § 229.503) of Regulation S-K requires that a registrant provide a description of the material risks that impact a business and how these risks affect the registrant or an investment in the securities being offered by the registrant. The disclosure should be written in plain English and not a sweeping general statement applicable to any issuer or offering. For further information, see Top 10 Practice Tips: Risk Factors. Below are some examples of U.S. Tariff Policies disclosures contained in the Risk Factor section of offering documents and periodic filings:

  • "Tariffs and other trade measures could adversely affect the combined company's results of operations, financial position and cash flows.
    In 2019, the U.S. government continued to impose tariffs on steel and aluminum and a broad range of other products imported into the United States. In response to the tariffs imposed by the U.S. government, the European Union, Canada, Mexico, India and China have announced tariffs on U.S. goods and services. The new tariffs have increased Apergy's material input costs, and any further trade restrictions, retaliatory trade measures and additional tariffs could result in higher input costs to the combined company's products. The combined company may not be able to fully mitigate the impact of these increased costs or pass price increases on to its customers. While tariffs and other retaliatory trade measures imposed by other countries on U.S. goods have not yet had a significant impact on Apergy's business or results of operations, it cannot predict further developments, and such existing or future tariffs could have a material adverse effect on the combined company's results of operations, financial position and cash flows." Apergy Corporation, Form S-4/A filed April 17, 2020 (SIC 3530—Construction, Mining & Materials Handling Machinery & Equipment)

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