USTR Should Abandon Unsuccessful & Harmful Tariff Policy

4 yrs later China has yet to abandon unfair trade practices

By [ Blake Harden ]
01/17/2023

In 2018, the U.S. implemented tariffs on more than $300 billion worth of imports from China, an action part of the Office of the U.S. Trade Representative (USTR) section 301 investigation involving China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. Because the section 301 tariffs have now been in place for more than four years, the Trade Act of 1974 requires USTR to review them, assess their effectiveness in compelling changes in China’s behavior, and determine whether other actions are warranted.

As part of this review process, RILA filed comments with USTR, sharing the retail industry’s perspective on the impact of these tariffs. In our comments, we refute any notion that the section 301 tariffs have been effective in addressing China’s unfair trade practices identified in USTR’s 2018 report. In fact, we detail just how damaging the section 301 tariffs have been for American businesses, consumers, and workers – including leading retailers and their customers.

Economic Harm: By the Numbers

Since the tariffs were first imposed over four years ago, U.S. Customs and Border Protection (CBP) has assessed more than $166.6 billion in tariffs on American companies who import products from China. That amount grows each day the tariffs remain in place.

According to a report by Moody’s Analytics, American companies assumed more than 90 percent of the cost of U.S. tariffs on Chinese goods. For retailers, that cost reflects a missed opportunity to create jobs, innovate, and invest in communities.

A recent study by the Trade Partnership Group made the following findings regarding the tariffs’ economic impacts by product category:

Section 301 tariffs on apparel products from China “affected nearly 90% of apparel imported from China” and “imposed an annual direct cost on importers of over $1 billion, escalating every year.”
Section 301 tariffs on footwear from China “imposed an annual direct cost on importers of over $250 million, escalating every year to over $450 million in 2022.”
Section 301 tariffs on travel goods “resulted in growing a direct cost to importers, reaching nearly $800 million in 2022.”
Section 301 tariffs on furniture “imposed an annual direct cost on importers of over $1 billion.”

Further, a recent study by the American Action Forum found that “based on 2021 data, U.S. consumers paid $48 billion in Section 301 tariffs to import goods from China.”

Ineffectiveness

RILA’s comments further describe the complete disconnect between a policy of tariffing consumer products to boost U.S. competitiveness and thwart China’s high-tech ambitions.

Section 301 tariffs, by their design, are intended to “serve as negotiating leverage to eliminate those [trade] barriers to, and other distortions of trade which Title I of this bill gives the President broad authority to harmonize, reduce or eliminate on a reciprocal basis.” But four years into the tariffs, China has yet to abandon its unfair trade practices. Instead, the section 301 tariffs have failed to bring about the desired change in China’s behavior while causing disproportionate harm to Americans.

Consumer products have no nexus to the underlying USTR 301 investigation into China’s unfair trade practices that gave rise to the tariff actions. These products are not linked to China’s Made in 2025 program and do not fall within the strategic or critical sectors that are the focus of USTR’s 301 report. In other words, these products are not linked to U.S. national security or strategic competition with China. Moreover, leading retailers are generally not the victims of the four unfair trade practices described in USTR’s 301 report. Because consumer products are not strategically linked to China’s high-tech ambitions, tariffs on these products have failed to compel change in China’s behavior.

RILA’s comments also outline more targeted policies that USTR and the broader Biden-Harris Administration could pursue to address China’s unfair trade practices more effectively.

Finally, the comments urge USTR to reinstate a broad, predictable, and transparent product exclusions process during the review and for as long as 301 tariffs remain in place. RILA further urges USTR to hold a public hearing given the magnitude of this four-year review.

In short, the section 301 tariffs are bad policy, lack strategic focus, and harm U.S. workers, consumers, manufacturers, and businesses. USTR should abandon this unsuccessful policy immediately and pursue other measures, in concert with other agencies within the Administration, to address China’s unfair trade practices more effectively.

RILA's full comments can be found here.