U.S. manufacturers should pay close attention to potential changes that could lead to an increase in lower priced competition from China. In 2018 and 2019, the Trump administration placed 25% duties (301 duties) on approximately $250 billion worth of Chinese imports. These duties remain in place today. However, recent statements by officials in the Biden administration have raised questions in regard to whether a change is in the works.
Section 301 of the Trade Act of 1974 allows the Office of the United States Trade Representative (USTR) to enforce U.S. rights under trade agreements and address unfair foreign barriers to U.S. exports. Section 301 authorizes USTR to take various actions, including increased tariffs on goods imported into the U.S. from the country under investigation. The Trump administration conducted a Section 301 investigation into China’s economic practices and imposed tariffs on Chinese goods imported into the U.S. market for (1) forced technology transfer requirements; (2) cyber-enabled actions to acquire U.S. IP and trade secrets illegally; (3) discriminatory and nonmarket licensing practices; and (4) state-funded strategic acquisition of U.S. assets.
After USTR imposed tariffs of 25% on four different tranches of goods imported from China in 2018 and 2019, the Trump administration struck the “Phase One” deal with China in January 2020. China committed to purchasing $200 billion in U.S. goods and services while the Trump administration postponed additional planned Section 301 tariffs on Chinese goods. However, the Section 301 25% tariffs already in effect as of January 2020 remained in place.
The Biden Administration and Section 301 Tariffs
The Biden administration has kept the 301 duties in place. However, on April 21, 2022, Deputy National Security Adviser Daleep Singh explained that the Section 301 tariffs on a wide range of goods “serve no strategic purpose” and should be eliminated. Treasury Secretary Janet Yellen noted the next day that cutting tariffs was “worth considering” as it would help combat inflation.
The recent statements by administration officials have raised the question of whether the duties will be terminated or allowed to expire by the President. This would be a potentially significant decision as numerous US manufacturing industries have been vocal supporters of the 301 duties.
Recent statements appear to indicate that the administration is seriously considering lifting the 301 duties – either in whole or in part. Should Section 301 tariffs expire or the number of exclusions granted increase, there will likely be an increase in imports from China across numerous product lines. U.S. importers will likely cheer any such decision. However, for U.S. manufacturers this could lead to increased competition with lower priced Chinese imports, and possibly the loss of sales and market share. This is an issue that U.S. manufacturers should watch carefully. It is entirely likely that there will be an uptick in trade remedy investigations, including antidumping and countervailing duty cases, should removal of the 301 duties result in a surge in Chinese imports.
Buchanan has a coordinated team of international trade and national security attorneys ready to help U.S. manufacturers who have been negatively impacted as a result of import competition.