Alongside the expiration of the current Farm Bill and the expiration of all federal funding, September 30th also represents the conclusion of current exclusions from Section 301 tariffs on products imported from China. While this may not get the level of coverage enjoyed by the Farm Bill and the annual funding bills (especially with talk of a possible government shutdown), looming decisions around the 301 tariffs are consequential to many U.S. companies and the broader economy.
The United States Trade Representative is conducting, and hopes to wrap-up soon, a statutory four-year review of the 301 tariffs. The tariffs have faced significant opposition from the business community (and scrutiny from many on Capitol Hill), especially across industries that have been subject to these tariffs but do not have a significant domestic manufacturing sector being harmed by imports. Even those who have been able to secure exclusions from the tariffs face annual uncertainty around product supplies, costs, and schedule based on the existing exclusion process.
All that being said, the policy landscape is very complicated in this space. Most obvious is that these tariffs were originally the product of the Trump Administration as leverage with China. The Biden Administration inherited this policy, and his comments on the campaign trail were not positive (at best) around how impactful this trade policy would be. Of course, the Administration has a number of influencing factors – not the least of which are the ongoing tensions between the United States and China. But also, there are many other complicating and conflicting factors -- a strong bipartisan coalition in Congress focused on threats from China, an interest within the White House to reduce tensions with China, an uncertain economy, strong union support within the White House, a 2024 election on the horizon, bipartisan support for onshoring and rebuilding a domestic manufacturing sector, a strong focus on reducing inflation and the price of consumer goods, and a business community that has been and continues to advocate for the end of 301 tariffs.
It is an unusually complicated decision tree that leaders within the Administration will need to approach prior to September 30th. But the risks around changing existing exclusions for U.S.-based companies and the retailers they rely on are real, especially when looking at a wide spectrum of economic analysis – from strong growth to recession – and the difficulties that remain as companies recover from the pandemic.
And despite broad fatigue around trade (for good reason), engagement will be important. Look to September to a busy time for discussions around the future of these 301 tariffs.