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Tariffs and trade wars were both hot topics during the Trump administration, when new tariffs were levied on thousands of different types of Chinese goods. Solar panels, washing machines and raw materials like steel and aluminum were just some of the products that came under scrutiny. In all, the administration placed tariffs—taxes on products that are produced abroad—on billions of dollars’ worth of goods from global sources.
With so much else going on in the world over the last two-and-a-half years, tariffs haven’t exactly been grabbing headlines. However, the issue may be coming back into focus as President Biden considers rolling back some of the tariffs that his predecessor increased or introduced.
Section 301 Tariffs
Specifically, Reuters says these new conversations surround the “Section 301” tariffs imposed in 2018 and 2019 on thousands of products valued at $370 billion at the time over China’s alleged “theft” of US intellectual property. Section 301 of the Trade Act of 1974 grants the Office of the United States Trade Representative (USTR) a range of responsibilities and authorities to investigate and take action to enforce U.S. rights under trade agreements and respond to certain foreign trade practices.
Ever since the World Trade Organization (WTO) was established in 1995, and up until the Trump Administration, the U.S. used Section 301 authorities primarily to build cases and pursue dispute settlement at the WTO. In 2018, USTR determined that China’s acts, policies and practices related to technology transfer, intellectual property (IP) and innovation were unreasonable or discriminatory and burdened or restricted U.S. commerce.
From there, Section 301 authorities were used to impose four rounds of increased tariffs on about two-thirds of U.S. imports from China. Concurrently, USTR introduced a new policy allowing stakeholders to request “tariff exclusions” for US imports that would otherwise have been subject to tariffs.
Not Quite Sure Yet
It’s no secret that the Biden Administration is looking for new ways to provide relief to American businesses and consumers that are dealing with the ongoing global pandemic, persistent supply chain shortages, rising costs and inflation. “With continued high inflation, business interests constantly asked the Biden administration to reconsider tariffs. Now the administration is reportedly going to provide partial relief,” The Diplomat reports.
“The Biden administration considers the lifting of some tariffs mainly as a way to respond to domestic dissatisfaction with the current high prices,” it adds, “especially with the pressure of the midterm election at the end of the year.”
Citing a Peterson Institute for International Economics (PIIE) study, the publication says any series of steps meant to reduce or eliminate existing tariffs “could eventually reduce the U.S. consumer price index by 1.3 percent.” It says that in the current political climate, even a “modest change” to China policy may be met with strong skepticism from both Republicans and Democrats.
Considering the Options
Imposed on China as part of a “trade war,” the Section 301 tariffs that are currently in place reach as high as 25% and cover hundreds of billions of dollars’ worth of imported goods from the country. In early-July, the White House said it is still considering its options, Time reports, and had yet to officially address the topic or lay out a plan of action.
“Strong pressure is coming from US labor unions to continue the tariffs, fearing job losses due to increased outsourcing of manufacturing to China,” Doug Barry of the U.S.-China Business Council told Time. The organization represents about 200 companies that trade and do business with China. “Weakened demand for China imports means less economic activity generated by those imports,” Barry added, “[including] fewer truck drivers, salespeople, accountants, and less tax revenue for local governments where the US companies do business.”
As the buzz around tariff rollbacks continues to build, Clete Willems, who previously served as deputy director at the National Economic Council, told CNBC that he expects some type of tariff rollbacks to materialize in the short-term. “I think we’re going to see something relatively modest in the short term,” he said. “But over the long term, I’m hopeful [that] this will lead to a process that tries to rationalize things more broadly and link them more closely to their supply chain objectives.”
