Existing exclusions from the additional Section 301 tariffs on imports from China will expire at the end of 2020, and president-elect Joe Biden recently gave his clearest indication yet that those tariffs will remain in place for the time being. As a result, U.S. importers and others are launching an effort to persuade the incoming administration to reinstate the tariff exclusion process.
The 25 percent tariff on List 1, 2, and 3 goods from China, and the 7.5 percent tariff on List 4A goods from China, are currently in place against products with a combined import value of more than $350 billion annually. Over the last two years a small percentage of products have been excluded from these tariffs, but most of those exclusions have since expired and the remainder will do so Dec. 31. In addition, the outgoing Trump administration has not entertained the idea of extending the exclusions in the belief that doing so would decrease U.S. leverage in future trade negotiations. As a result, the full Section 301 tariffs are expected to be imposed on previously excluded goods beginning Jan. 1, 2021.
Moreover, president-elect Biden recently said in an interview with The New York Times that he will not “make any immediate moves” to lower or eliminate the China tariffs. He indicated that the tariffs have not “actually produce[d] progress on China’s abusive practices” but said he will first conduct a thorough review of the U.S.-China phase one trade agreement and work to develop a more multilateral strategy with traditional U.S. allies.
Affected companies are therefore considering ways to ameliorate the impact of the forthcoming tariff increases, including by reinstating the tariff exclusion process. Ned Steiner, senior director, international trade and government relations, for ST&R, said businesses are optimistic that the next U.S. trade representative will be open to this possibility. “It makes both policy and political sense for the new administration,” Steiner said. “In short, it would provide near-term relief to U.S. companies without requiring a wholesale revision of current U.S.-China trade policy, something president-elect Biden has expressly said he will not do.”
In addition, there appears to be strong bipartisan support among members of Congress for reinstating the exclusion process. “Congress pressed for the creation of this process in the first place,” Steiner said, “and a number of members have introduced legislation or otherwise expressed their support for renewing it.” However, he cautioned that a vocal coalition of companies will be needed to actively advocate for a renewal, including not only those seeking to reinstate previous exclusions but also those interested in obtaining new exclusions, including those that may previously have been denied.
Source: Sandler, Travis & Rosenberg, P.A