On Tuesday, the United States Trade Representative, Katherine Tai, issued a statement explaining the reasons behind imposing new tariffs totaling $180 billion on Chinese products.
The Office of the United States Trade Representative (USTR) released a report titled “Four-Year Review of Actions Taken Pursuant to Investigations under Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.”
The 193-page report served as the foundation for the tariff actions against China announced by the Biden administration on Tuesday.
Following the tariffs imposed by the Trump administration in 2018 on roughly $300 billion worth of Chinese goods, the Biden administration has largely continued these tariffs. Additionally, under Section 301 of the U.S. Trade Act, a routine four-year review of these tariffs was initiated in 2022.
In another statement issued by USTR on Tuesday titled “Tariff Action on the Results of the Statutory Review of the 301 Investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” Tai emphasized that the actions were a result of the routine four-year review of the tariffs under the Section 301 during the Trump era, as instructed by President Biden.
After conducting a thorough review of the statutory report on the 301 tariffs and considering her recommendations, President Biden directed further action to encourage the elimination of China’s unfair policies and practices related to technology transfer. Tai stated in her announcement, “These policies and practices continue to burden American businesses and harm American workers and companies.”
“As recognized in the memorandum by the President, while tariffs have effectively encouraged some actions by the Chinese side to address the issues identified in the Section 301 investigation, further actions are necessary,” she added.
“Following President Biden’s instructions, I will propose modifications to the tariffs under Section 301 to counteract Beijing’s unfair policies and practices,” she further noted.
According to the regulations under Section 301, the four-year review must consider factors such as the effectiveness of the tariff actions in achieving the investigative goals, alternative actions that can be taken, and the overall impact of the tariff actions on the U.S. economy.
In order to further eliminate China’s improper behaviors, policies, and practices related to technology transfer, USTR recommended maintaining the current tariffs on Chinese products subject to the Section 301. Additionally, President Biden instructed Tai to take action to increase or raise tariffs on certain products due to the increased burden on American businesses.
Tai suggested imposing additional tariffs on the following industries, as outlined in the report:
The four-year review report on the Section 301 also made the following recommendations: (1) Establishing an exclusion process for machinery used in domestic manufacturing, including 19 exclusion proposals for certain solar manufacturing equipment; (2) allocating additional funds to U.S. Customs and Border Protection to enhance the enforcement of Section 301 actions; (3) enhancing collaboration and cooperation between private companies and government authorities to combat state-sponsored technical theft; (4) continuing to evaluate methods to support supply chain diversification to enhance the flexibility of the U.S. supply chain.
USTR will publish a notice in the Federal Register next week on how to solicit public input on the proposed modifications and the domestic manufacturing machinery exclusion process.
In May 2022, USTR initiated the statutory four-year review process, notifying domestic industry representatives benefiting from the tariff actions that these actions may be terminated, and representatives could submit requests to continue the tariffs.
In September 2022, USTR announced that due to continued requests, the tariff actions had not been terminated, and USTR would initiate a review of the tariffs. USTR opened a docket to the public on November 15, 2022, for comments on certain considerations related to the review. USTR received nearly 1,500 comments.
As part of the statutory review process throughout 2023 and early 2024, USTR and the Section 301 Committee (a staff-level interagency committee led by USTR on trade policy work) held multiple meetings with institutional experts on the review and recommendations.
Specifically, the review concluded with the following points:
– The tariff actions under Section 301 effectively encouraged China to take measures to eliminate some improper behaviors, policies, and practices related to technology transfer, reducing the impact on American individuals and businesses.
– China has not eliminated many improper behaviors, policies, and practices related to technology transfer, which continue to burden or restrict American businesses. China has not sought fundamental reform but instead remained unyielding, and in some cases, became even more aggressive, including through cyber intrusions and theft, attempting to obtain and absorb foreign technology, further aggravating or limiting the burden or restrictions on American businesses.
– Economic analysis generally believes that the negative impact of tariffs (particularly Chinese retaliatory tariffs) on the overall economic welfare of the United States is minimal, but it has a positive impact on the production of the ten sectors most directly affected by tariffs. At the same time, the impact on the overall economy in terms of prices and employment is minimal.
– The negative impacts on the United States are mainly related to retaliatory tariffs imposed on American exports by China.
The above impact analysis treats tariffs as isolated policy measures without considering the policy environment that may amplify or diminish the effects of tariffs.
Economic analysis – including major analyses by the U.S. International Trade Commission – generally suggests that the Section 301 tariffs help reduce imports from China into the United States and increase imports from other sources (including U.S. allies and partners), potentially supporting supply chain diversification and maintaining flexibility.