U.S. Announces Section 301 Tariffs and China Immediately Reciprocates

On April 3, 2018, the Office of the U.S. Trade Representative (“USTR”) announced its highly anticipated list of products imported from China that will be subject to an additional 25 percent tariff. This action follows USTR’s investigation into Chinese trade and industrial policies that harm U.S. intellectual property, issued March 22, 2018, under Section 301 of the Trade Act of 1974. That same day, President Trump signaled his intention to impose these tariffs on Chinese imports, as well as other measures. (See our March 22 Legal Update, Section 301 Report by U.S. Trade Representative: Chinese Trade Practices and U.S. Measures in Response.)

The proposed list now released by USTR includes approximately 1,300 separate tariff lines and covers around $50 billion worth of Chinese goods. (The product list and proposed tariff increases can be found here.) Sectors subject to the proposed tariffs include aerospace, information and communication technology, robotics and machinery. The proposed list is based on what USTR described as extensive interagency economic analysis and would target products benefitting from China’s industrial plans, while minimizing the impact on the U.S. economy. According to USTR, China’s policies bolster its stated intention of seizing economic leadership in advanced technology as set forth in various industrial plans, such as “Made in China 2025.”

Written comments on the proposed tariffs are due by May 11, 2018. USTR will hold a public hearing on May 15. Post-hearing rebuttal comments are then due on May 22. After completion of this process, USTR stated that it will issue a final determination on the products subject to the additional duties.

These U.S. tariffs were just the latest in an escalating dispute between the two countries. On April 1, China announced its intention to retaliate against the United States for imposing global steel and aluminum tariffs following its Section 232 investigations in early March. (See our March 9 Legal Update, U.S. Tariffs on Steel and Aluminum Imports.) According to China, it will impose a 15 percent tariff on 120 products and a 25 percent tariff on eight products covering a total of $3 billion worth of U.S. imports. China contends that the Section 232 tariffs actually constitute safeguard measures, rather than measures designed to protect U.S. national security. In China’s view, it is thus permitted to suspend “substantially equivalent” tariff concessions on U.S. products. China’s tariff increases were scheduled to become effective on April 2.

Within hours of USTR’s April 3 tariff announcement pursuant to Section 301, China harshly condemned what it called “the unfounded Section 301 investigation and the proposed list of products and tariff increases based on the investigation.” Beijing followed immediately by declaring its intention to impose still more new tariffs worth about $50 billion dollars on 106 U.S. products, including soybeans, airplanes and cars. China indicated that the timing of its tariffs depends on U.S. moves. This rapid reciprocation may be telling, however. Soybeans are the top U.S. agricultural export to China. By targeting soybeans for new tariffs, China is viewed as sending an especially strong political signal to the United States.