An economist and a former assistant U.S. trade representative for trade policy and economics agreed that rolling back the Section 301 tariffs on Chinese imports would be modestly helpful to fight inflation, but that it wouldn't be noticeable to many consumers. Ed Gresser, the former assistant USTR now at the Progressive Policy Institute, a Washington think tank, said that he thinks the administration's talk that the best way to refine the Trump-era tariffs is to roll back those on consumer goods is misguided. "The effect there has been to shift a lot of purchasing to Vietnam, a little bit to Mexico and a little bit to India," he said, so he doesn't think inflation would change much if those tariffs are dialed back. He said the more inflationary part of the tariffs is the 25% tariffs on industrial inputs.
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.
The following lawsuits were filed at the Court of International Trade during the weeks of Aug. 15-21 and 22-28:
Large U.S. multinationals are more pessimistic about doing business in China than they have ever been, but it's not because they have come to expect the Section 301 tariffs will never go away. Rather, the annual U.S.-China Business Council membership survey found that lockdowns to control COVID-19 are the top problem for companies doing business in China, with 96% of respondents saying the lockdowns hurt their firms, and 48% saying that there was a severe negative impact.
Some companies said in recently submitted comments they used to benefit from Section 232 tariffs but no longer do. Others said they previously were able to mitigate the cost impact of Section 301 tariffs through exclusions, finding other suppliers or other trade benefits but can't anymore.
The U.S. Court of Appeals for the Federal Circuit ruling to overturn a Court of International Trade decision that called into question the use of first sale treatment for imported goods involving non-market economy countries (see 2208110060) is largely seen as providing a welcome relief to importers, several law firms said. "For those importers enjoying the benefits of lower declared values and duties, particularly from China in light of Section 301 tariffs, there is no longer a need for concern now that, on appeal, the court has given first sale a nod," Sandler Travis lawyer Lenny Feldman said on a podcast. The original CIT decision (Meyer Corporation v. U.S., Fed. Cir. #21-1392) raised some concerns for the future of first sale treatment (see 2104200028).
The following lawsuits were filed at the Court of International Trade during the week of Aug. 8-14:
President Joe Biden is less likely to suspend some Section 301 tariffs on goods from China following a recent visit by House Speaker Nancy Pelosi, D-Calif., to Taiwan, Sidley Austin lawyer Ted Murphy said in a blog post. "Before the visit, our view was that the Administration was leaning toward suspending some of the duties," he said. "China’s reaction to the Speaker’s visit, coupled with the fact that this is an election year, however, makes it hard to see that happening now. In our view, any action on the Section 301 duties will likely be tabled until after the November election."
Correction: Richard Harper, director of government affairs at the Outdoor Industry Association, noted, during an International Trade Commission hearing, that supply chains moved out of China for outdoor goods and other types of goods (see 2207210015).
The Office of the U.S. Trade Representative often found itself weighing the possible harm to U.S. consumers from the lists 3 and 4A Section 301 tariffs against the need to give the duties enough teeth to curb China’s allegedly unfair trade practices, the agency said in its 90-page “remand determination,” filed Aug. 1 at the Court of International Trade (In Re Section 301 Cases, CIT #21-00052). Submitting its bid to ease the court's concerns over modifications made to the third and fourth tariff waves, USTR provided its justifications for removing various goods from the tariff lists ranging from critical minerals to seafood products.
The following lawsuits were filed at the Court of International Trade during the week of July 25-31: