A withdrawal of the U.S. from NAFTA by President Donald Trump could help push the new NAFTA through Congress, according to Sen. Chuck Grassley, the Iowa Republican who will take over the Senate Finance Committee next year. Grassley, who was speaking on an agriculture radio program on Dec. 3, also praised the president's approach to trade more broadly.
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
A 90-day pause in implementing increased Section 301 tariffs will run from Dec. 1, the White House said as it corrected the record the evening of Dec. 3. National Economic Council Director Larry Kudlow had erroneously said that the 90-day delay in increasing tariffs on $200 billion in Chinese imports would start Jan. 1. That was the day that tariffs were scheduled to rise from an additional 10 percent on the base rate to 25 percent. Jennifer Hillman, a Georgetown Law professor and former general counsel at the Office of the United States Trade Representative, tweeted that the Federal Register will have to be updated to reflect the new deadline, which should fall around March 1.
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Importers need to be ready to defend to CBP any changes in country of origin that moves a product outside the Section 301 tariffs on goods from China, said Doug Zuvich, a partner in KPMG's Trade and Customs Services group. Zuvich, a former customs auditor, and others at KPMG discussed rules of origin during a Nov. 30 webinar. "It's really important to know the mindset from Customs, that they're going to come at this most likely thinking the worst," Zuvich said.
Section 301 tariffs on certain Chinese goods will remain at 10 percent after Jan. 1, after President Donald Trump and Chinese President Xi Jinping reached a deal to suspend the tariff increase, said the White House in a statement. Under the agreement, concluded Dec. 1 at the G20 summit in Buenos Aires, China will purchase “a not yet agreed upon, but very substantial” amount of agricultural, energy and industrial goods.
With the U.S. “on the cusp” of Section 301 tariffs scheduled to rise to 25 percent Jan. 1, 2019, on $200 billion worth of Chinese imports, President Donald Trump “has taken the authority that he does not have under the law” when he ordered the imposition of the duties, Consumer Technology Association President Gary Shapiro told the American Legislative Exchange Council’s States & Nation Policy Summit on Nov. 29. Speaking before an audience of mainly conservative state legislators, Shapiro stopped well short of threatening a CTA court challenge to block the higher tariffs from taking effect (see 1811090044).
The tariffs will hurt “thousands” of American tech companies, but also “our farmers and others as China is retaliating,” Shapiro said. “I travel around the world. I talk to government leaders. This is just not a China-U.S. issue. Every developed country in the world is concerned about this tariff war, which can not only lead us into a recession, but potentially a depression.” By imposing the tariffs, the administration is “going against” the American “brand of freedom” in trade and the “welcoming in” of foreign trade partners, Shapiro said. He conceded that China “is not a fair player, by the way. But raising tariffs, in our view, is not the way” to curb China’s unfair trade practices, he said. CTA didn’t comment.
A former Office of the U.S. Trade Representative deputy predicted that the president of China and President Donald Trump would meet in the middle at the G-20 in Argentina, neither resolving the problems between the two countries nor declaring an impasse. He did not sound as confident that some kind of progress would be enough to halt the escalation in tariffs. "I think the signals from both countries are [that] they know this is an opportunity," Robert Holleyman said, as he opened a Nov. 28 Tariff Town Hall sponsored by tuna canneries. "I hope this gets us out of the current morass."
President Donald Trump should not back down from taking further action against China should the country fail to make real concessions just to get a “meaningless” deal done at the upcoming G-20 Conference in Buenos Aires, said a group of prominent Democratic senators in a letter dated Nov. 28. “China has not offered to make any structural reforms to their trade practices regarding the use of government subsidies to boost its emerging industries, technology transfers, and espionage,” said a statement released alongside the letter, citing a report in The New York Times. “We urge you to stand firm against China if meaningful concessions are not made. American jobs, American innovation, and long-term American economic prosperity are at stake,” said the letter, signed by Senate Majority Leader Chuck Schumer, D-N.Y., as well as Sen. Sherrod Brown, D-Ohio, and Sen. Ron Wyden, D-Ore. Section 301 tariffs against China are scheduled to rise to 25 percent on Jan. 1, 2019, unless Trump directs otherwise.
It’s “highly unlikely” that President Donald Trump will suspend or delay an increase in Section 301 tariffs from 10 percent to 25 percent set to take effect Jan. 1, he said in a Nov. 26 interview with The Wall Street Journal. Trump said he’s “very happy with what’s going on right now” with more tariffs on deck. Tariffs might even be coming on consumer products like iPhones and laptops, Trump said. “I can make it 10 percent and people could stand that very easily.” Trump advised U.S. companies “to build factories in the United States and to make the product here.” China should “make a fair deal” where it opens itself to competition, he said. “They have to open up China to the United States. Otherwise, I don’t see a deal being made. And if it’s not made, we will be taking in billions and billions of dollars,” he said. “I happen to be a tariff person,” he said earlier in the interview.
International Trade Today is providing readers with some of the top stories for Nov. 19-23 in case they were missed.