President Donald Trump’s signing of a memorandum Thursday proposing tariffs on about $60 billion worth of Chinese goods imported to the U.S. didn’t detail for now which specific products would be targeted. But CTA President Gary Shapiro wasted little time in warning the tariffs would threaten to put “a new tax on U.S. businesses” and force consumers “to pay dramatically more to access the technology products they need.”
Section 301 Tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump Administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump Administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions—particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Almost three quarters of U.S. imports from China were subject to Section 301 tariffs, which ranged from 15% to 25%. The U.S. and China engaged in negotiations resulting in the “U.S.-China Phase One Trade Agreement”, signed in January 2020.
The Biden Administration took steps in 2021 to eliminate foreign policies subject to Section 301 investigations. The administration has extended and reinstated many of the tariffs enacted during the Trump administration but is conducting a review of all Section 301 actions against China.
President Donald Trump's order to review whether China's trade practices discriminate against American companies' IP (see 1708140060) is generally viewed optimistically by industry, and experts told us they hope this at least improves trade relations incrementally. “This is a measured step that raises fair questions [and] it provides ample opportunity to avoid unnecessary escalating trade tension by improving the treatment of American IP in China," said Sentinel Worldwide CEO Steve Tepp. "It's a smart move.”
The International Trade Commission should highlight foreign countries' data localization laws as a top barrier to digital trade in a forthcoming report, telecom and tech officials said Tuesday during an ITC hearing. The commission began an investigation in February at the Office of the U.S. Trade Representative's request into developments in the digital trade market and how laws in the U.S. and “key foreign markets” are affecting digital trade. The ITC is examining laws in the EU, Brazil, China, India, Indonesia and Russia. The commission is expected to release the first of three reports on the investigation by Aug. 29, with the other two reports to be released in 2018 and 2019.