Over the past five years, a central focal area of U.S. trade policy has been the implementation of – and the ongoing battle against – Section 301 tariffs. Starting back in 2017, the Trump administration utilized Section 301 of the Trade Act of 1974 to launch an investigation into China’s trade practices. Since the initial launch of this investigation, there have been various rounds of tariffs announced by the U.S., which have been matched by consequent, retaliatory trade actions from the Chinese government. All of these actions have facilitated an increasingly tense and complicated trade dynamic between the U.S. and China, with slim chances at best for any real improvement in the near future. Instead, Section 301 tariffs will continue to contribute to the ongoing tensions between China and the U.S., which is also impacted by other trade actions at play – including export controls, sanctions, multilateral efforts, and more.
As the Office of the U.S. Trade Representative (USTR) currently has an open comment docket to solicit feedback on the viability and impact of these tariffs, it is useful to look back on the past few years of tariff activity to see the cadence of efforts that have taken place. Both the Trump and Biden administrations have been involved in implementing tariff actions, as well as launching consequent narrow exclusion processes to offer some relief for certain entities. Meanwhile, in Congress, there were efforts to reform the exclusion process during negotiations to reach a consensus on legislation that would enhance U.S. competitiveness against China. These efforts focused on building a more robust exclusion process that would offer consistent, strong opportunities for relief from tariffs. However, these provisions did not make it into the final legislation due to lawmaker differences.
The below timeline demonstrates the continuous level of activity on Section 301 tariffs from both Congress and the administration over the past five years:
August 8th, 2017: Trump administration launches Section 301 investigation into Chinese trade practices.
July 6th, 2018: First tranche of tariffs goes into effect on $34 billion in goods.
August 23rd, 2018: Second tranche of tariffs goes into effect on $16 billion in goods.
September 24th, 2018: Third tranche of tariffs goes into effect on $200 billion in goods.
September 1st, 2019: Fourth tranche of tariffs goes into effect on $300 billion in goods.
January 15th, 2020: President Donald Trump signs Phase One trade agreement, with tariffs remaining in effect.
June 8th, 2021: Senate passes the U.S. Innovation & Competition Act, bipartisan legislation to counter against Chinese influence, with provisions for Section 301 exclusions.
February 4th, 2022: House passes a Democratic-only Chinese competition bill, the America COMPETES Act, without Section 301 provisions.
March 28th, 2022: USTR retroactively implements the 352 product exclusions that had previously expired from the Section 301 process.
May 4th, 2022: USTR launches statutory review of the first two tranches of the Section 301 tariffs.
August 9th, 2022: President Biden signs the CHIPS and Science Act into law, which did not include the provisions related to building a robust Section 301 tariff exclusion process.
Looking ahead to the 118th Congress, it remains unclear what future dynamic will be at play between the administration and Congress as it relates to trade policy – especially with respect to Section 301 tariffs. While there is a delicate policy balance at play in terms of partisan dynamics and the overall geopolitical situation, U.S. businesses remain extremely committed to reforms of the Section 301 process and continued exclusions. As these tariffs continue to impact the supply chain amid rising economic concerns, there will be significant attention paid to how Congress and the administration handle these issues.
The 118th Congress presents a new, uncertain landscape for a number of reasons. Several key congressional champions and experts of trade policy are retiring at the end of the 117th Congress and will not be returning in 2023. There is considerable opportunity for new champions to materialize, but changing dynamics on the key trade-focused committees – the House Ways & Means Committee and the Senate Finance Committee – will impact any movement on tariff policy over the next two years. For the newly Republican-controlled House Ways & Means Committee, there is an undecided three-way race for control of the committee that will undoubtedly set the course for the committee. Meanwhile, on Senate Finance, the retirements of Senators Rob Portman (R-OH), Pat Toomey (R-PA), and Richard Burr (R-NC) will leave a gap for trade policy advocacy. Overarchingly, China will be one of the paramount areas of focus in the new Congress, but the U.S.-China policy atmosphere is crowded enough that it could be difficult to gain meaningful traction on Section 301 issues.
Furthermore, there’s a delicate dynamic on these issues for the Biden administration. President Biden is balancing varying viewpoints from progressive colleagues and unions, while still seeking to appease more moderate members of the party. While the administration is continuing to solicit comments in their ongoing four-year review of the Section 301 tariffs implemented in 2018, the prevailing prediction in DC is that the administration will take these comments as a foundation upon which to grant more exclusions – not an opportunity to remove the tariffs altogether. Furthermore, after having recently extended COVID-related exclusions from last year, the administration has another exclusion expiration deadline coming up – by which point they must decide whether to extend, expand, or remove those exclusions.
Expect continued activity on Section 301 tariffs – not only for the near-term process, but also for longer-term policy. In this complicated policy space, the only certainty is that activity surrounding Section 301 tariffs is not going anywhere.