The decision follows a statutory four-year review of Section 301 China tariffs. The tariffs were put into effect in 2018 after a United States Trade Representative (USTR) probe found that certain China’s trade practices and policies were either discriminatory or burdened U.S. companies and workers. Biden said he was also raising tariffs on certain Chinese imports, such as electric vehicles, solar cells, semi-conductors, ship-to-shore cranes and steel and aluminum products.
“After thorough review of the statutory report on Section 301 tariffs, and having considered my advice, President Biden is directing me to take further action to encourage the elimination of the People’s Republic of China’s unfair technology transfer-related policies and practices that continue to burden U.S. commerce and harm American workers and businesses,” Ambassador Katherine Tai, U.S. Trade Representative, said in a statement Tuesday.
Tai noted that while China took some steps to address issues in the Section 301 investigation, further action is required to stop China’s harmful technology transfer-related acts that include cyber intrusions and cyber theft. A report from the USTR also makes recommendations for continuing to assess approaches to support diversification of supply chains to enhance our own supply chain resilience.
The report’s economic analyses determined that tariffs—particularly China retaliation—have had “small negative effects on U.S. aggregate economic welfare, positive impacts on U.S. production in the 10 sectors most directly affected by the tariffs, and minimal impacts on economy-wide prices and employment.” Moreover, the tariffs have contributed to a reduction of U.S. imports from China and an increase of imports from other sources, such as U.S. allies and partners. That result potentially supports “U.S. supply chain diversification and resilience,” the report concluded.
While the National Council of Textile Organizations (NCTO) generally approved of the new tariffs, it also believed that an opportunity was missed to address what its CEO Kim Glas says is “China’s continued dominance in the U.S. textile market and to counter the devastating impact of its predatory and illegal trade practices on domestic textile manufacturers and workers.”
Glas is asking the Biden administration to “level the playing field” via a further tariff increase on finished textile, apparel and related inputs, including critical personal protective equipment items. She also said the administration and Congress need to close the de minimis loophole that undermines trade enforcement efforts, which reward China with duty free access to the U.S. market regardless of 301 tariffs.
“While the Section 301 tariffs on finished textile and apparel imports help to partially counter China’s unfair trade advantages, subsidized Chinese textile and apparel inputs—including those made from slave labor in Xinjiang where 20 percent of global cotton is produced and where man-made fibers like rayon have been tied to forced labor—continue to undermine this vital industry,” Glas said. “Furthermore, China has been dropping its prices since the tariffs took effect to convince sourcing agents to stay loyal despite the risks.”
Four other trade groups—Footwear Distributors and Retailers of America (FDRA), Retail Industry Leader Association (RILA), National Retail Federation (NRF), and American Apparel & Footwear Association (AAFA)—took issue with one of the findings in the USTR report.
“The President, much like his predecessor, seems to have an insatiable appetite to tax American families on the items they have to buy like footwear, clothing, and other basic goods,” FDRA’s president and CEO Matt Priest said in a statement. “These tariffs have had a significant impact on U.S. consumers, particularly working families and minority communities, costing an additional $20 billion since 2019.”
Priest said the decision to maintain the tariffs, coupled with current challenges of soaring inflation, underscores the urgency of finding a balanced solution that prioritizes both economic considerations and the well-being of American consumers.
The FDRA and 39 of the nation’s largest footwear industry leaders sent a letter to President Biden urging the removal of Section 301 tariffs on footwear, noting that the tariffs serve as a hidden tax levied on American companies and consumers, particularly for certain types of children’s footwear.
RILA was also unhappy with the decision to maintain tariffs on consumer goods.
“We are deeply disappointed by the Biden Administration’s decision to double down on the use of harmful, broad-based tariffs—which is an affront to American businesses and consumers. Over the last five years, U.S. businesses and consumers have paid more than $215 billion in higher tariffs for a failed experiment in trade policy,” said Blake Harden, RILA’s vice president, international trade, in a statement. “Section 301 tariffs have not been effective in holding China accountable for its unfair trade practices, and they have harmed the global competitiveness of U.S. businesses.”
Harden said U.S. retailers have worked hard to bolster their supply chains to be more agile and resilient, as well as shield consumers from the impact of high tariffs. He noted that broad-based tariffs are not strategic and will impede U.S. economic growth, as well as “ultimately hamstringing” American businesses who are trying to compete globally.
“As the Biden administration and Congressional lawmakers consider policies to address the challenges in the U.S.-China relationship, we urge them to explore a more strategic, targeted approach that increases U.S. competitiveness globally,” Harden concluded.
The National Retail Federation, a retail trade group, also expressed its frustration with the decision to “double-down” on what it called a “failed and inflationary strategy” by keeping and expanding the Section 301 China tariffs.
“As consumers continue to battle inflation, the last thing the administration should be doing is placing additional taxes on imported products that will be paid by U.S. importers and eventually U.S. consumers,” David French, NRF’s executive vice president of government relations, said. “We need new free trade agreements that focus on both market access and tariff reductions, and we need Congress to pass long-standing trade preference programs which remain expired. The U.S. economy needs real incentives—unlike those in the form of penal tariffs—to shift supply chains away from China.”
AAFA president and CEO Steve Lamar said the extension of tariffs on a wide range of apparel, footwear and accessories is a “real blow to American consumers and manufacturers alike.” He called the tariffs “regressive taxes” paid by U.S. importers and U.S. manufacturers that are ultimately passed along to U.S. consumers.
“The Biden Administration has had two years to get it right. Unfortunately, they doubled down on a flawed tariff policy, despite the Biden Administration’s own acknowledgment that this policy has failed in its goals, and overwhelming public input that supported a different outcome,” Lamar said.
AAFA vice president of trade Beth Hughes added that the Biden administration has done nothing to negotiate new trade agreements or improve on current ones. “The administration has done little to promote the renewal or prevent the threat of renewal of expired and expiring trade preference programs. This report underscores the Biden administration’s lack of an effective trade policy agenda,” she said.
Tai’s office in December extended China 301 tariff exclusions on 352 imports and 77 COVID-related categories until May 31, 2024. Those exclusions end in 17 days. The tariffs were enacted by Trump under the aegis of the Trade Act of 1974 in 2018 and 2019.
The tariffs were met with much criticism from Biden—who said they were a tax on consumers—when he was on the campaign trail in 2020. While the tariffs were expected to be repealed by Biden when Trump left office, Biden has since taken a tougher stance on China. Compounding the problem for the retail trade groups, former President Trump is now upping his campaign rhetoric ahead of the November election. One of Trump’s talking points is that he would expand on the Section 301 tariffs he implemented during his presidency, most notably by raising duties on China imports by more than 60 percent, if elected.
