Meet the new boss, same as the old boss, at least when it comes to some of President Biden’s trade policies toward China. Closing in on two full years in office, the White House has yet to establish a formal strategy on tariffs put in place under Section 301 of the trade laws by former President Trump starting in 2018 that still remain unchanged today.
The U.S. currently imposes a 25% tariff on 6,847 imported goods from China and 7.5% on an additional 3,233 imports. President Biden has not made changes to these tariffs. As of this writing, the federal government does not allow importers to submit requests for a temporary exclusion from paying the tariffs.
Over the summer, President Biden signed into law a bill to combat China’s rise technologically and to incentivize domestic semiconductor manufacturing. The White House also this year initiated the In-do-Pacific Economic Framework for Prosperity (IPEF), a group of 14 countries – including India, Thai-land, Vietnam and Australia – also intended to counter China in the region. They have increased the enforcement of trade laws and restricted more U.S. technology from being exported to Chinese companies.
When it comes to tariffs, however, we still await action after months of false starts. Many who support the tariffs likely see the inaction as action.
Several factors contribute to the indecision (or decision) on tariffs this far into President Biden’s term in office. Internally, some members of his cabinet see a lifting of tariffs on targeted consumer and other goods as a way to reduce inflation and help U.S. businesses. Meanwhile, other members of his cabinet do not want to relinquish leverage over China by lifting tariffs without concessions from Beijing in return.
Domestically, the White House faces pressure in top manufacturing states of Ohio, Pennsylvania and Wisconsin to stay tough on China ahead of the November 8 midterm elections, with the fate of the U.S. Senate riding on those voters. Economically, the retail sector in particular is calling on the presi-dent to provide relief as the U.S. faces some consumer slowdown in the coming months that could drag into the start of the 2024 race for the White House, which is slated to begin next year.
Globally, President Biden must look tough on China to counter Beijing’s influence in Southeast Asia. After Speaker Pelosi’s trip to Taiwan, however, Washington does not want to further strain an already tense relationship.
All these forces could easily lead one to believe the tariff policy of the White House is inaction, but we are starting to see some movement. Prompted by a statutory mandate, the Office of the U.S. Trade Representative (USTR) announced in May 2022 that it would initiate the required four-year review of the Section 301 tariffs to solicit requests from supporters of continuing the tariffs.
On Sept. 2, 2022, the USTR announced it received 358 requests from domestic producers and 76 re-quests from trade associations to keep the 25% and 7.5% tariffs in place. It will now move forward with a full review of the impact of the tariffs on the U.S. economy and stakeholders, and it will solicit comments from both supporters and opponents of the trade action.
The review will take several months to complete due to the expected influx of filings from importers of the goods covered by tariffs and manufacturers that compete with Chinese products that are often subsidized by their government or produced by state-owned enterprises.
Few in Washington believe the USTR review of the 301 tariffs will lead to a full lifting of the 25% or 7.5% rates on the over 10,000 Chinese imports. The political calculations previously outlined do not allow for removing the tariffs in the coming months.
President Biden is forming coalitions on climate with Europe against China, partnerships in the In-do-Pacific region to strengthen economic ties and alliances in parts of East Asia to improve military ties. But when it comes to tariffs, the U.S. is still on its own.
The launch of the review by the USTR likely buys the Biden administration more time to decide on how to move forward on the question of tariffs and pushes a decision beyond the November 8 elections. This means that most or all of the tariffs remain in place for the foreseeable future.
There are a few other scenarios under consideration. The White House could still opt to remove some items from the tariff list or start a new Section 301 investigation targeting different sets of products. Sources in Washington indicate the Biden administration will most likely continue the Section 301 tariffs while restarting an exclusion process, allowing a pathway for importers to seek relief while trying to appease manufacturers in the U.S. competing with China. Insiders learned over the summer that President Biden has signed off on an exclusion process, but the White House was still looking for ways to support those hurt by Chinese imports at the time.
President Biden and President Xi of China could meet on the sidelines of G-20 meetings taking place in mid-November, but few expect a major breakthrough in any talks. This inaction on China tariffs contrasts with the Section 232 tariffs of 25% on imported steel and 10% on overseas aluminum. The Biden administration began securing deals earlier this year with allies such as the European Union, Japan and the United Kingdom to replace the tariffs on their imports with tariff rate quotas (TRQs). Based on conversations in Washington, additional action on the steel or aluminum tariffs is unlikely prior to the end of 2023 when the TRQ deal expires. While not the outcome many would like, there is at least stability and predictability in the status of the tariffs.
When it comes to the unchanged China tariff policy, we can still expect more of the same for the near future as the current administration continues the policies of the past.