President Biden Adds, Increases, and Maintains Tariffs on Chinese Goods Levied by President Trump

Following a review of tariffs on Chinese goods levied by President Donald J. Trump pursuant to Section 301 of the Trade Act of 1974,¹ President Joseph R. Biden, Jr. has decided to add some, increase others, and maintain the remainder.² The new and augmented tariffs—on a wide range of goods, including critical minerals, electric vehicles, lithium-ion batteries, semiconductors, solar cells, aluminum, and steel—mostly seek to protect American manufacturers of clean energy products and high-end technologies. The expanded tariffs complement a range of policies imposed under other authorities, such as significant government investment in the high-tech and clean energy sectors³ and non-tariff actions (including export controls and foreign investment restrictions) that aim to hamper Chinese development of those industries.⁴ Some of the tariff additions and increases are preventive (the United States currently imports almost no electric vehicles, semiconductors, or steel from China),⁵ and their overall economic impact is not significant (affecting only about $18 billion in annual imports of the $448 billion from China and the more than $3.1 trillion from all countries).⁶ Nonetheless, the panoply of measures taken by the Biden administration over the past several years, including adding, increasing, and maintaining the Section 301 tariffs, comprise an economic strategy (frequently called “de-risking” or “de-coupling”) that merges national security with industrial policy, with the technology sector and strategic competition with China at its core.⁷ The administration's actions continue the United States’ unilateral approach to trade disputes begun under President Trump (though both Canada and the European Union subsequently imposed new tariffs on Chinese electric vehicles and Canada added levies on aluminum and steel as well), and they serve as a reminder that the United States retains the right, given the absence of a functioning Appellate Body, to appeal adverse World Trade Organization (WTO) panel reports into a legal void.

In August 2017, as part of a wide array of tariff actions and other trade measures taken under President Trump,⁸ the Office of the U.S. Trade Representative (USTR) initiated an investigation under Section 301 to determine “whether acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation” were “unreasonable or discriminatory and burden[ed] or restrict[ed] U.S. commerce.”⁹ Seven months later, in March 2018, USTR found that China's practices were discriminatory. China “used foreign ownership restrictions . . . to require or pressure technology transfer from U.S. companies,” “forced U.S. companies seeking to license technologies to Chinese entities to do so on non-market-based terms that favored Chinese recipients,” “directed and unfairly facilitated the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and IP and generate the transfer of technology to Chinese companies,” and “conducted and supported unauthorized intrusions into, and theft from, the computer networks of U.S. companies to access their IP, including trade secrets, and confidential business information.”¹⁰ Accordingly, the White House announced the imposition of tariffs in accordance with Section 301 on “goods imported from China containing industrially significant technology.”¹¹ The tariffs, issued in two rounds, affected at first $50 billion in goods.¹² A trade war with China ensued, and by August 2019 the United States had imposed tariffs on an additional $500 billion in goods in two separate tranches.¹³ In January 2020, the United States and China agreed to a trade deal that reduced or eliminated some of these tariffs.¹⁴ A planned second deal never materialized, however, and once in office, the Biden administration decided to retain the extant tariffs, which at this point covered more than $360 billion in goods.¹⁵

Section 301 tariffs automatically expire after four years if a representative of the domestic industry that benefitted from them does not request their continuation.¹⁶ USTR announced on September 8, 2022, that such a request had been submitted and that all the tariffs would remain in effect pending a statutorily required review.¹⁷ The review would evaluate the tariffs’ “effectiveness” in eliminating China's unfair or discriminatory trade practices, as well as the tariffs’ “effects . . . on the United States economy, including consumers.”¹⁸ USTR received nearly 1,500 comments as part of the review process.¹⁹

In May of this year, USTR completed and issued its review. Regarding the effectiveness of the tariffs, the review concluded that they had: (1) encouraged China to “take steps toward eliminating the investigated technology transfer-related acts”; (2) reduced “the exposure of U.S. persons and companies”; (3) and provided “an incentive for importers to find alternative sources.”²⁰ Even so, China had “not eliminated its technology transfer related acts, policies, and practices, which continue[d] to impose a burden or restriction on U.S. commerce.”²¹ China had also “persisted, and in some cases [had] become aggressive, including through cyber intrusions and cybertheft, in its attempts to acquire and absorb foreign technology.”²² Turning to the effects on the U.S. economy, the review found that (1) the “tariffs . . . had small negative effects on U.S. aggregate economic welfare”; (2) they had “positive impacts on U.S. production in the 10 sectors [that were] most directly”; and (3) they had “minimal impacts on economy-wide prices and employment.”²³

Based on these conclusions, and in order to “maintain the current leverage” on China and “encourage [it] to eliminate the technology transfer-related acts,” the review recommended that “products currently subject to section 301 duties . . . remain subject to [those] duties” and that “modifications [be made] to add or increase tariffs for certain [specified] products.”²⁴ The review also recommended: additional funding for U.S. Customs and Border Protection for tariff enforcement; greater public-private collaboration to prevent cyber-intrusion and economic espionage; continued assessment of supply chain resilience; and establishment of a tariff exclusion process for machinery used in domestic manufacturing.²⁵

Advised of these findings by U.S. Trade Representative Katherine Tai, the president directed USTR to maintain, add, and increase the Section 301 tariffs, as the review had recommended.²⁶ Accordingly, USTR published a proposed list of tariff increases,²⁷ and following public comment, those modifications were finalized in early September.²⁸ Focusing on protecting the U.S. high-tech sector and especially clean energy (though also touching on medical products), tariffs were increased on battery parts (non-lithium-ion) (from 7.5 percent to 25 percent), electric vehicles (from 25 percent to 100 percent), facemasks (from 7.5 percent to 25 percent immediately and 50 percent in 2026), lithium-ion EV and non-EV batteries (from 7.5 percent to 25 percent), medical gloves (from 7.5 percent to 50 percent in 2025 and 100 percent in 2026), semiconductors (from 25 percent to 50 percent), solar cells (from 25 percent to 50 percent), and steel and aluminum products (from 7.5 to 25 percent).²⁹ Tariffs were added on natural graphite (25 percent), other critical minerals (25 percent), permanent magnets (25 percent), ship-to-shore cranes (25 percent), and syringes and needles (100 percent).³⁰ In making its tariff recommendations, USTR explained that “[i]ncreasing or adding section 301 tariffs on products targeted by China for dominance will . . . encourag[e] alternative sourcing in strategic sectors of the economy, reducing U.S. reliance on China, while also reducing exposure to China's . . . practices, and help to maintain resilient, diverse, and secure supply chains.”³¹ They will also complement “significant [U.S.] investments, including through such initiatives as the IRA and the Bipartisan Infrastructure Law[,] . . . [that] seek[] to improve U.S. economic competitiveness, innovation, and productivity . . . in U.S. production and technology in strategic sectors.”³²

Shortly after President Biden's decision to increase tariffs on electric vehicles, Canada and the European Union (EU) also increased their tariffs. In July, the EU provisionally imposed duties on Chinese electric vehicles, varied by manufacturer, with a maximum of 37.6 percent.³³ Those duties were made definitive in October, extending them for at least five years,³⁴ despite negotiations between the EU and China that would have avoided that decision.³⁵ In August, Canada imposed a 100 percent tariff on Chinese electric vehicles.³⁶ Following the United States, Canada also imposed a 25 percent tariff on Chinese aluminum and steel.³⁷ Canadian Prime Minister Justin Trudeau said: “I think we all know that China is not playing by the same rules.”³⁸ “What is important about this,” he continued, “is we're doing it in alignment and in parallel with other economies around the world.”³⁹

Responding to President Biden's announcement that additional tariffs would be imposed, and the existing Section 301 tariffs would not be withdrawn, Liu Pengyu, the spokesperson for the Chinese Embassy in Washington, DC, said that “[t]he WTO has drawn a clear conclusion that the U.S.'s Section 301 tariffs violate WTO rules and international law. The US move . . . will only significantly drive up the cost of imported goods, inflict more loss on American companies and consumers, and make the US consumers pay even more.”⁴⁰ “The latest move by the US,” he continued, “is typical unilateralism, political maneuvering and hegemonic bullying.”⁴¹ In September, China released its annual “Report on WTO Compliance of the United States,” criticizing the United States for its “so-called ‘de-risking’ policy,” for “escalating unilateral sanctions,” and for “discriminatory economic and trade policies,” such as the Section 301 tariffs.⁴²*