Biden Administration Announces Completion of China Section 301 Review and New Tariffs
Highlights
- The Biden Administration announced the completion of a review by the Office of the United States Trade Representative of China's trade practices under Section 301 of the Trade Act of 1974, the culmination of a process that has taken two years.
- The announcement includes plans to maintain current tariffs on Chinese imports and to increase tariffs on a range of Chinese products, including electric vehicles, solar cells and medical products.
- The new tariffs signal an intensification of policies designed to protect U.S. manufacturers from Chinese imports.
- China, anticipating that its exports would face higher tariffs as a result of this Section 301 review, announced it was prepared to retaliate.
The Biden Administration announced on May 14, 2024, the completion of its review of China's trade practices under Section 301 of the Trade Act of 1974. The White House announcement maintains current tariffs on Chinese imports and includes plans to impose new tariffs on a range of Chinese products.
The review of China's trade practices, undertaken by the Office of United States Trade Representative (USTR), was a required four-year review following the imposition of tariffs on Chinese products by the Trump Administration in 2018. The Biden Administration was under pressure to complete this review, which was initiated in 2022.
New and Existing Tariffs
Based on the review, President Joe Biden announced he will direct USTR to maintain all existing tariffs on Chinese imports and impose new tariffs on a range of products, including the following:
- semiconductors: from 25 percent to 50 percent by 2025
- certain steel and aluminum products: from 7.5 percent to 25 percent in 2024
- electric vehicles (EVs): from 25 percent to 100 percent in 2024
- lithium batteries for EVs and critical minerals: from 7.5 percent to 25 percent in 2024
- solar cells: from 25 percent to 50 percent in 2024
- ship-to-shore cranes: from 0 percent to 25 percent in 2024
- rubber medical and surgical gloves: from 7.5 percent to 25 percent in 2026
If the U.S. government follows a similar process to its imposition of tariffs after USTR's original Section 301 investigation that was completed in March 2018, USTR would issue a Federal Register notice with the proposed tariff action, inviting written comments from the public. Then, USTR would hold a public hearing for parties to state their positions as to appropriate action for the U.S. government to take in response to this 2023 Section 301 investigation. Lastly, USTR would issue its final determination as to new and increased tariffs. Based upon the prior process, it is expected to take a few months before the initial wave of new and increased duties are implemented, but timing remains uncertain.
The announced tariff hikes, which President Biden called for in recent weeks, are part of the administration's strategy to address what many analysts perceive as Chinese anti-competitive practices and its overcapacity in the production of key products, including steel, aluminum and solar panels.
USTR, in its statement, announced it will establish a tariff exclusion process for machinery used in domestic manufacturing, with priority given to equipment used in solar panel manufacturing.
China has given clear indications it would retaliate against any tariff hikes. A Foreign Ministry spokesperson on May 10, 2024, said China would take "all necessary measures to defend its rights and interests." In the past, Chinese retaliation has included U.S. food and agriculture. These retaliatory tariffs have contributed to a drop in U.S. food and agriculture exports; the United States recently became a net importer of these products, ending a long streak of trade surpluses.
Looking Forward
Companies and consumers should expect to see increased pricing for Chinese origin products and inputs as a result of tariffs taking effect as soon as this year. They should also expect to see Chinese retaliation in the form of new or increased tariffs on U.S. products.
Holland & Knight's Public Policy and Regulation Group and International Trade Group are closely monitoring developments and will continue advising clients on ways to navigate the challenging trade environment, including engaging U.S. government officials to share insights and provide recommendations.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.