The Expansion of Tariffs on Goods Imported from China

Following the culmination of a four-year statutory review of the Trade Act Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, the United States has announced the expansion of tariffs on goods imported from China.

The products that would have 25% higher tariffs are steel, aluminum, semiconductors, solar cells, ship-to-shore cranes, medical products, electric vehicles, and lithium-ion batteries and their components. The United States Trade Representative’s (USTR) decision to target these sectors is based on China’s efforts to expand its market share in these areas and the U.S.’s parallel investments in green energy and semiconductor industries. The new tariffs aim to complement these U.S. subsidy policies and encourage companies to diversify their sourcing away from China.

The four-year review report of the Section 301 tariffs assessed their effectiveness in altering China’s policies and their impact on the U.S. economy. The report concluded that the tariffs have partially succeeded in prompting China to modify some technology transfer policies and foreign ownership restrictions. However, many technology transfer-related practices remain unchanged, still burdening U.S. commerce. The report underscores ongoing issues, such as China’s industrial planning strategies that continue to drive technology transfer and state-sponsored intellectual property theft, highlighting persistent challenges despite some progress.

Regarding the economic effects, the review found that the Section 301 tariffs and China’s retaliatory tariffs have negatively impacted the U.S. economy. However, they have also helped expand domestic production in the sectors protected by the U.S. tariffs. The review also asserts that the tariffs have encouraged U.S. importers to source merchandise from countries other than China, noting that the share of U.S. imports coming directly from China has decreased. USTR argues that this trade diversion supports the Biden administration’s supply chain diversification objectives and reduces the risk of technology transfer occurring in the future.

The increased tariffs on Chinese-made electric vehicles (EVs) and batteries are expected to have different impacts. While the quadrupled tariff on EVs from 25% to 100% will likely have minimal immediate effect due to the currently small number of Chinese EVs in the U.S., the 17.5% increase on Chinese-made batteries could significantly affect the market by raising their prices above those of American-made counterparts. This could enhance the competitiveness of U.S.-produced EV batteries. However, since China dominates the mining and processing of essential minerals for EV batteries, the higher tariffs may increase the costs for U.S. automakers like Ford and Tesla, who rely on Chinese lithium iron phosphate batteries, potentially leading to higher vehicle costs for consumers.

?For more information on how the new tariffs on Chinese products could affect your business, contact the qualified attorneys at Rock Fusco & Connelly, LLC.