And just like that, the Biden Administration has reengaged in the China Tariff War. With yesterday's announcement of significant tariff increases in key sectors, the Administration is putting special attention on protecting the U.S.’s fledgling EV industry. While the Administration has recently been saber-rattling about Chinese-made electric vehicles, there was little indication that battery components were on the chopping block. This was especially true after the Administration took such significant steps to weed out Chinese suppliers in the recent rules that define the Inflation Reduction Act’s (IRA) tax credits. In fact, some might argue that the policy behind the final IRA’s rules is inconsistent with this most recent announcement on tariffs. And, if the IRA’s final rules did not already hamper the U.S.’s push towards electrification, yesterday'stariff announcement will certainly have a chilling effect on supply chains and the costs of EVs in the U.S. in the near future.
As we reported in May 2022, the Office of the United States Trade Representative (USTR) commenced the statutory four-year review of China 301 tariffs. Just a few short weeks ago, the USTR was under attack from members of Congress over the Administration’s lack of action on tariffs. That all changed yesterday, as Trade Representative Katherine Tai announced that under the direction of President Biden, further actions are required to “encourage the elimination of the People’s Republic of China’s unfair technology transfer-related policies and practices.” This decision came at the end of President Biden’s first term, when, for the past three years, the Administration seemed content with leaving the status quo on China with respect to tariffs. This comes at a time when, in recent weeks, President Trump threatened 60% or greater tariffs on all Chinese goods if re-elected.
Specifically, the Trade Representative has recommended that products from China that are currently subject to Section 301 tariffs should remain.
In addition, President Biden has directed USTR to take action to increase tariffs across “strategic sectors,” such as steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products. Specifically, the Trade Representative is proposing to modify in the following strategic sectors:
The Trade Representative also proposes to establish an exclusion process targeting machinery used in domestic manufacturing. According to USTR’s report, “the proposed exclusion process will be limited to machinery under certain 8-digit tariff lines in Chapter 84 and Chapter 85 of the HTSUS.” The Trade Representative is also proposing 19 temporary exclusions for certain solar manufacturing equipment.
According to Ambassador Tai, USTR will issue a Federal Register notice next week announcing the proposed modification and exclusion process. Until this notice has been released, the impact on specific imported products has not been identified.
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