In brief

What happened?

President Biden announced on May 14 a series of tariff increases on $18 billion of imports from China under Section 301 of the Trade Act of 1974 (Section 301). The White House on the same day released a Fact Sheet setting forth the purpose and the details of the increases. The Fact Sheet notes that President Biden is taking this action based on an in-depth review undertaken by the United States Trade Representative (USTR) to protect American workers and American companies from China’s unfair trade practices. The USTR’s findings were published in a 193-page report the USTR released May 14 as the culmination of its lengthy Section 301 investigation, entitled Four-Year Review of Actions Taken in the Section 301 Investigation: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.

In addition to serving as the basis for the newly proposed tariffs, this extensive report also notes that 352 formerly expired product exclusions that were reinstated by the USTR on March 28, 2022, will expire again on May 31, 2024. The report does not indicate what the USTR intends to do about these expiring exclusions, but the USTR has announced that it is planning to issue a Federal Register Notice in the near future that will explain what will happen to these exclusions.

President Biden also on May 14 issued a memorandum to the USTR with respect to the four-year review summarized in the report linked above.

Why is it relevant?

The tariff increases will affect a range of strategic sectors, such as steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products. The tariff rates will vary from 25% to 100%, depending on the product. The tariff increases will raise significantly the costs of importing these products from China and may disrupt US supply chains and markets that rely on them.

The expiration of 352 product exclusions on May 31 also will raise the costs of importing the affected products from China and may disrupt US supply chains and markets that rely on them.

Action to consider:

US companies that import, manufacture, or use the affected products should assess the impact of the tariff increases on their operations, cash flows, and competitiveness, and explore potential mitigation strategies, such as diversifying their sources of supply or production, or passing on the costs to their customers or suppliers. US companies also should monitor the developments of the US-China trade relations and the possible responses from China or other trade partners, such as retaliation, litigation, or negotiation.