The United States begins reviewing tariffs of $ 300 billion on China imports
The United States begins reviewing tariffs of $ 300 billion on China imports

The United States begins reviewing tariffs of $ 300 billion on China imports

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(Bloomberg) – President Joe Biden’s administration will soon begin a review of the first batch of more than $ 300 billion in tariffs on Chinese imports needed to prevent their expiration, a process likely to re-examine their effectiveness. , as inflation runs at four- decade high.

The evaluation, officially known as a “review of necessity”, has so far attracted little attention. It relates to Section 301 of the Trade Act of 1974, the law that President Donald Trump used to hit China with the tariffs that started in July 2018.

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The law says tariffs expire four years after they are imposed, unless the U.S. Attorney General’s Office analyzes their effectiveness and consequences. The review must take place within 60 days of their potential completion, which is July 6 for the first batch of $ 34 billion in Chinese goods, with the majority to expire in the following months.

“This is not something that can be ignored,” said Stephen Kho, a partner in the Washington office of the law firm Akin Gump Strauss Hauer & Feld LLP, which represents clients who have previously sued to have some of the duties removed. “You can not just do this process in a half-hearted way. The review will bring renewed interest in dealing with the Section 301 tariffs. “

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The USTR’s press office confirmed the need for the review.

The Biden administration has given no signal of plans to remove tariffs, even with inflation above 7% and energy-wheat prices rising after Russia’s invasion of Ukraine tightened commodity supplies.

Trump struck tariffs on China as part of a trade war that imposed tariffs of nearly $ 500 billion on products shipped between the two nations. In early 2020, they agreed on the so-called Phase 1 agreement, in which the United States reduced some tariffs in return for Beijing committing to tackle the theft of intellectual property and buy $ 200 billion in energy, agriculture and manufacturing along with services through December last year.

Biden has kept tariffs in place a year after his presidency, as data constantly showed that China is not living up to U.S. purchase commitments. This has increased the chances that taxes will become a more permanent part of the trading landscape.

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USTR Katherine Tai has for months engaged with colleagues in Beijing to make the nation live up to more of its promises. Negotiations with China have not led to a major breakthrough, and the Biden team sees limited ability to continue to push these negotiations further.

Without a strong rationale for easing tariffs as tensions between the United States and China simmer, the Biden team has little political room to take such a step, though it is looking for ways to cool inflation ahead of the midterm elections in November.

Hard to relax

“It’s always harder to dismantle trade protection than to put it in place,” said Wendy Cutler, a longtime U.S. trade negotiator who is now vice president of the Asia Society Policy Institute in Washington. Trump’s Phase 1 deal provided “no good opportunity to take steps to get China to join,” she said.

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U.S. companies and lawmakers are asking for tariff relief. Last month, a two-part group of 41 senators called on Tai to create a more comprehensive process to exclude some Chinese imports from customs, which they say has a negative impact on U.S. companies.

The Thai office from October last year to December sought public comment on whether to reintroduce tariff exemptions on 549 products from China.

Five months after the opening of the comment period, no public action has yet been taken, and the USTR’s annual report this month says it will continue to review the submissions.

Last year, the Biden administration also considered a new study of China’s industrial subsidies under Section 301. It could lead to a recalibration of tariffs – raising them on products that benefit from Chinese practices that Washington is attacking and lowering them. input used by US companies.

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Last year, Treasury Secretary Janet Yellen acknowledged that tariffs are being paid by U.S. consumers, a point recently reiterated by the U.S. Chamber of Commerce, which has called for the tariff exemptions to be reinstated and for the scope of the exemption process to be extended.

Still, ending them without getting anything in return could make Biden open to accusations of being lenient with China – an accusation already made by some Republicans in Congress as Senator Marco Rubio. The AFL-CIO, the largest American labor union and a major Democratic interest group, also wants tariffs to remain in place until China changes its policy.

If the tariffs are removed now, “there is a real risk that China will perceive that it is getting a better deal because it is not complying with the last deal,” said Stephen Vaughn, who served as USTR general counsel under the Trump administration and is now . partner at the law firm King & Spalding LLP.

The Biden administration is likely to seek to keep them in place because removing them would open it up to Republican attacks, said William Reinsch, who served as deputy secretary of commerce for the Clinton administration’s export administration.

“I do not think they are in love with politics, but they are a little stuck in it,” said Reinsch, now a senior adviser at the Center for Strategic and International Studies. “I would not look for radical change.”

© 2022 Bloomberg LP

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