As the Office of the U.S. Trade Representative (USTR) is expected to issue a final determination on its proposed “modifications” of the actions toward China under Section 301, U.S. economists, trade groups and international organizations have voiced concerns and expressed disappointment, warning that the imposition of additional tariffs could hurt U.S. companies and consumers.
On May 14, U.S. Trade Representative Katherine Tai announced that President Joe Biden is directing her to “take further action” on China tariffs after releasing statutory four-year review of Section 301 tariffs. The proposed “modifications” include raising tariffs in “strategic sectors,” such as batteries, electric vehicles, semiconductors, as well as steel and aluminum products.
In late May, the USTR issued a Federal Register notice regarding proposed tariff modifications under Section 301 and the machinery exclusion process, inviting public comment. On July 30, the USTR stated that it will continue to review all comments and expects to issue its final determination in August.
In a statement released earlier this year, the U.S.-China Business Council (USCBC), a private, nonpartisan, nonprofit organization of more than 270 American companies that do business in China, expressed disappointment in the results of the Section 301 review.
“We are disappointed with the outcome because maintenance of the prior tariffs — with no reductions — and imposition of additional tariffs ultimately make it harder for American companies to compete in the U.S. and abroad, cost American jobs, and increase prices for U.S. manufacturers and consumers during a time of ongoing inflation,” USCBC President Craig Allen said.
“As USCBC requested in our public comments, we appreciate USTR’s creation of a tariff exclusion process so that U.S. companies can request needed and common-sense relief, but its scope appears narrow,” said Allen.
Jeffrey Sachs, an economics professor and director of the Center for Sustainable Development at Columbia University, told Xinhua that the new tariffs violate America’s World Trade Organization commitments, hurt consumers, and raise geopolitical tensions.
In an opinion piece published earlier this year, William Alan Reinsch, Scholl Chair in International Business at the Center for Strategic and International Studies, said that the real loser in this decision is climate.
“Since we rely on China for key elements of the green transition, notably solar cells, batteries, and the critical minerals that go into them, the effect of the tariffs will be to make those products more expensive and to slow down the transition that will help the United States meet its climate obligations,” said Reinsch.
“The administration’s trade policy is based on politics, and this decision is no exception,” Reinsch said. “It is designed to get out in front of (Donald) Trump on tariffs and inoculate Biden against the inevitable accusation that he is soft on China.”
Echoing that point, Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, told Xinhua Monday that he thinks the USTR will make very few changes in the Section 301 tariff rates after reviewing public comment.
“The reason is that the Democrats don’t want to give Trump an opening to complain that they are ‘soft on China,'” said Hufbauer, a former U.S. Treasury official.
Noting that the existing tariffs have already been reflected in U.S. consumer and business prices, Hufbauer said firms that were hoping for relief will now give up. “Neither (Kamala) Harris nor Trump will (offer) much relief for the next four years,” he said.
In late June, the International Monetary Fund (IMF) stated in a concluding statement following the completion of its 2024 Article IV Mission to the United States that “the ongoing intensification of trade restrictions and the increased use of preferences in the treatment of domestic versus foreign commercial interests represent a growing downside risk for both the U.S. and the global economy.”
“Tariffs, nontariff barriers, and domestic content provisions are not the right solutions since they distort trade and investment flows and risk creating a slippery slope that undermines the multilateral trading system, fragments global supply chains, and spurs retaliatory actions by trading partners,” IMF staff said in the statement.
“These policies are ultimately bad for U.S. growth, productivity, and labor market outcomes and the evidence suggests their costs are largely borne by U.S. consumers and firms,” they added.
Ken Montgomery, executive director of Technology Trade Regulation Alliance (TTRA), said that the TTRA does not believe that the tariffs under Section 301 have been successful in addressing the trade issues between the United States and China, noting the organization “has long advocated addressing these issues in bilateral policy discussions.”
“These additional tariffs will increase the input costs and prices for technology products for consumers and businesses, increasing inflation in the U.S.,” Montgomery said. “In addition, U.S. businesses will be less competitive with foreign suppliers due to these added costs and increased prices.”
Thomas Rosensweet, president at Newport Metals, LLC, said that the company’s product, magnesium anodes, which is used to prevent corrosion in underground gas, oil and water pipes and propane tanks, is “only made in China because China produces more than 85 percent of the world’s supply of magnesium.”
“Because of the high quality of Chinese magnesium and the 100 percent U.S. anti-dumping duty on pure magnesium from China … the tariff amounts to a tax that is ultimately paid by the users” in the United States, he said.
