The Congressional Research Service, in a recent report, quantified the U.S.-China trade war and estimated its effects so far on bilateral trade. It said that as of Sept. 1, about 67 percent of U.S. imports from China have additional tariffs, most 15 to 25 percentage points higher, and about 60 percent of U.S. exports to China are taxed at an additional 5 percent to 25 percent.
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.
President Donald Trump announced a "very substantial phase 1" deal in the Oval Office Oct. 11, saying the Chinese and American negotiators came to a deal on intellectual property, financial services and agricultural sales. The president said China will buy as much as $40 billion to $50 billion worth of American commodities. He also said good progress had been made on issues around technology transfer from American companies to Chinese partners.
There's the possibility of an agreement on currency manipulation this week, according to U.S. Chamber of Commerce Head of International Affairs Myron Brilliant. Brilliant, who spoke with both China's chief negotiator and members of the Trump administration ahead of the Oct. 10 negotiating session, told reporters on a conference call that if the two sides come up with a currency agreement, that might lead to a reprieve for importers who are expecting 25 percent tariffs to go to 30 percent on Oct. 15.
Fitbit will shift production to "outside China," starting in January, for “effectively all of its trackers and smartwatches” to escape exposure to the tariffs on Chinese goods, the company said Oct. 9. "[T]hose products will no longer be of Chinese origin and therefore not subject to Section 301 tariffs.” Smartwatches and fitness trackers, comprising the entire product line, were hit with 15 percent List 4A tariffs Sept. 1 as part of the broad category of 8517.62.00.90 goods that also includes smart speakers and Bluetooth headphones (see 1908140031). The company began exploring potential alternatives to China last year, Chief Financial Officer Ron Kisling said. It altered its supply chain and manufacturing operations with “additional changes underway,” the company said. Fitbit will give additional details on its Q3 call within the month.
International Trade Today is providing readers with some of the top stories for Sept. 30 - Oct. 4 in case they were missed.
August TV unit imports from China increased 22.3 percent sequentially from July, and 37.5 percent year over year, according to newly published Census Bureau statistics accessed Sunday through the International Trade Commission’s DataWeb tool. Observers will debate whether the August spikes were evidence of importers speeding product through U.S. ports to beat the 15 percent Section 301 tariffs on finished TV sets from China that took effect Sept. 1.
Costco is experiencing “a lot of moving parts” with the Section 301 tariffs on Chinese goods, including a few price increases “along the way,” said Chief Financial Officer Richard Galanti on a fiscal Q4 call on Oct. 3. Costco has tariff exposure to many of the products on “the first three lists,” and “we'll just have to wait and see” the impact if those tariffs rise to 30 percent as scheduled Oct. 15, he said.
Cars assembled by Volvo in Sweden as part of a “knockdown operation” using subassemblies manufactured in China are products of China and are subject to Section 301 tariffs, CBP said in a recent ruling. The “complex assembly process” occurs in China, not Sweden, so that’s where substantial transformation happens for the purposes of determining country of origin, CBP said in HQ H302821, issued July 26 and published by CBP on Oct. 2.
CBP has assessed about $41 billion in duties under the major trade remedies started during the Trump administration as of Oct. 2, according to CBP's trade statistics page. That includes $31 billion in duties from the Section 301 tariffs on goods from China, up around $4 billion from about a month ago. The assessed tariffs under Section 301 now include the 15 percent tariffs that took effect on Sept. 1 (see 1908270066). CBP also has assessed about $8.1 billion under the Section 232 tariffs on steel and $1.7 billion under tariffs on aluminum. The Section 201 trade remedies on washing machines, washing machine parts and solar cells (see 1801230052), imposed Jan. 23, 2018, account for $1.1 billion in assessed tariffs.
More than a dozen companies and business groups have submitted comments ahead of an Oct. 2 hearing on how China is complying with World Trade Organization protocols -- and they all agree China has work to do.