There’s not much the Biden and Trump Administrations agree on — but it seems tariffs on China-made imports may be one area of exception. In addition to keeping many Trump-era tariffs in place, the Biden-Harris Administration recently added a slew of additional hikes to the pile.
But America isn’t alone. In the last few months, Canada announced that effective October 22, it would be placing a 25% tariff on “dozens of Chinese steel and aluminum products,” as well as a “100% levy on Chinese-made electric vehicles,” according to Bloomberg News.
Recently, the European Union (EU) made a similar announcement, voting to “adopt definitive tariffs on China-made battery electric vehicles (BEVs),” according to CNBC. In suspected retaliation, China issued a tariff hike on European brandy not long after the EU’s announcement.
Although trade tensions with China have been rising for years, shortages of critical goods in the U.S. during the COVID-19 pandemic underscored the downside of relying too much on a limited number of overseas suppliers instead of domestic sources or those closer to home.
Tariff-hike proponents point to such vulnerabilities as evidence for the need to discourage reliance on China to protect American interests on various fronts — including the ability to support domestic production. Those opposed say American businesses and consumers will bear the brunt of the increased rates, since companies will be forced to raise prices to compensate. They additionally note that pivoting from a global supply chain that took years to build to one more aligned with American interests is something that can’t happen overnight.
Here, we’ll take a look at the why behind the latest tariff hikes, details of each, and resources regarding the pros and cons according to various stakeholders impacted.
Background
In its September 13 announcement about findings of its four-year statutory review of the Section 301 investigation of the “People’s Republic of China’s (PRC) Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” the Office of the United States Trade Representative (USTR) provided the following background information related to the recent tariff decisions.
“In May 2022, USTR commenced the statutory four-year review process by notifying representatives of domestic industries that benefit from the tariff actions of the possible termination of those actions and of the opportunity for the representatives to request continuation,” the announcement said. “In September 2022, USTR announced that because requests for continuation were received, the tariff actions had not terminated and USTR would conduct a review of the tariff actions.”
The agency said that a request for comments garnered nearly 1,500 responses, and that during 2023 and early 2024, USTR and the Section 301 Committee, a subordinate, staff-level body of the USTR-led, interagency Trade Policy Staff Committee (TPSC), “held numerous meetings with agency experts concerning the review and the comments received.”
USTR said the Report concluded that:
- “The Section 301 actions have reduced some of the exposure of U.S. persons and businesses to these technology transfer-related acts, policies, and practices.”
- “The PRC has not eliminated many of its technology transfer-related acts, policies, and practices, which continue to impose a burden or restriction on U.S. commerce. Instead of pursuing fundamental reform, the PRC has persisted, and in some cases become more aggressive, including through cyber intrusions and cybertheft, in its attempts to acquire and absorb foreign technology, which further burden or restrict U.S. commerce.”
- “Economic analyses generally find that tariffs (primarily PRC retaliation) have had small negative effects on U.S. aggregate economic welfare, positive impacts on U.S. production in the 10 sectors most directly affected by the tariffs, and minimal impacts on economy-wide prices and employment.”
- “Negative effects on the United States are particularly associated with retaliatory tariffs that the PRC has applied to U.S. exports.”
- “Economic analyses, including the principal U.S. Government analysis published by the U.S. International Trade Commission, generally find that the Section 301 tariffs have contributed to reducing U.S. imports of goods from the PRC and increasing imports from alternate sources, including U.S. allies and partners, thereby potentially supporting U.S. supply chain diversification and resilience.”
USTR also noted that, “Critically, these analyses examine the tariff actions as isolated policy measures without reference to the policy landscape that may be reinforcing or undermining the effects of the tariffs.”
The findings of the four-year review are available on the USTR’s website.
After announcing proposed modifications on May 28, 2024, USTR sought public comment — which resulted in over 1,100 responses.
Proposed tariff increases
In a May 14 Fact Sheet, the White House described the trade landscape with China, need for intervention, and related next steps.
“China’s unfair trade practices concerning technology transfer, intellectual property, and innovation are threatening American businesses and workers,” the Fact Sheet said. “China is also flooding global markets with artificially low-priced exports. In response to China’s unfair trade practices and to counteract the resulting harms, today, President Biden is directing his Trade Representative to increase tariffs under Section 301 of the Trade Act of 1974 on $18 billion of imports from China to protect American workers and businesses.”
Saying that China’s “forced technology transfers and intellectual property theft have contributed to its control of 70, 80, and even 90 percent of global production for the critical inputs necessary for our technologies, infrastructure, energy, and health care,” the White House says such an environment creates “unacceptable risks to America’s supply chains and economic security. …”
Referencing the “in-depth review by the United States Trade Representative,” the Fact Sheet says President Biden is “taking action to protect American workers and American companies from China’s unfair trade practices” by increasing tariffs across “strategic sectors such as steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products.”
Tariffs proposed at that time include:
- Steel and Aluminum: The tariff rate on “certain steel and aluminum products under Section 301 will increase from 0–7.5% to 25% in 2024.”
- Semiconductors: The tariff rate on “semiconductors will increase from 25% to 50% by 2025.”
- Electric Vehicles (EVs): The tariff rate on “electric vehicles under Section 301 will increase from 25% to 100% in 2024.”
- Batteries, Battery Components and Parts, and Critical Minerals:
- The tariff rate on “lithium-ion EV batteries will increase from 7.5% to 25% in 2024.”
- The tariff rate on “lithium-ion non-EV batteries will increase from 7.5% to 25% in 2026.”
- The tariff rate on “battery parts will increase from 7.5% to 25% in 2024.”
- The tariff rate on “natural graphite and permanent magnets will increase from zero to 25% in 2026.”
- The tariff rate for “certain other critical minerals will increase from zero to 25% in 2024.”
- Solar Cells: The tariff rate on “solar cells (whether or not assembled into modules) will increase from 25% to 50% in 2024.”
- Ship-to-Shore Cranes: The tariff rate on “ship-to-shore cranes will increase from 0% to 25% in 2024.”
- Medical Products:
- The tariff rates on “syringes and needles will increase from 0% to 50% in 2024.”
- For “certain personal protective equipment (PPE), including certain respirators and face masks, the tariff rates will increase from 0–7.5% to 25% in 2024.”
- Tariffs on “rubber medical and surgical gloves will increase from 7.5% to 25% in 2026.”
For additional details regarding the rationale for each tariff decision — as well as initiatives to ramp up domestic production — please see the Fact Sheet.
Final modifications announced
In its September 13 announcement referenced previously, USTR announced final modifications regarding its statutory review and noted that the “proposed modifications” announced in May 2024 were “largely adopted” — with several updates after a review of more than 1,100 comments from the public.
Updates include:
- New timing and rates for tariffs on face masks, medical gloves, needles, and syringes
- An exclusion for enteral syringes
- A proposal regarding coverage of additional tungsten, wafers, and polysilicon tariff lines
- An exclusion for ship-to-shore cranes ordered prior to May 14, 2024
- An expansion of the scope of the machinery exclusions process to include five additional tariff lines
- Modification of the coverage of proposed exclusions for solar manufacturing equipment
Further information is available in the USTR’s Federal Register Notice.
“USTR expects to launch the machinery exclusions process soon, as well as the comment period for proposed modifications of tariff rates on certain tungsten, wafers, and polysilicon tariff lines,” the agency said. According to a Federal Register notice, USTR says the docket for public comments is currently open and will close October 22, 2024.
For more on stakeholder feedback regarding the new tariffs, please see:
