Industry Groups Say Ending China Tariffs Would Offset Supply Chain Pain

The U.S. trade representative has extended for 45 days tariff exemptions on face masks and related medical care products made in China, but a major trade association says the exemption's scope should be widened and more Trump-era tariffs should be rolled back to help businesses cope with rising import costs associated with unprecedented port congestion.

So far, the Biden administration has resisted calls from the business community to lift the tariffs on half a trillion dollars of Chinese goods. 

Importers did receive some good news this week when the administration finally said it would reinstate the general exclusion process for products subject to China tariffs. Applicants had to give reasons why a product should be exempt, such as a lack of domestic supply or availability at a reasonable price. Of the more than 2,200 exclusions that were granted, 549 had been extended, but they expired at the end of 2020.

The USTR said it will evaluate, case by case, the possible reinstatement of each exclusion.

Meanwhile, exemptions on tariffs for 99 Chinese-made types of personal protective equipment were set to expire Sept. 30 but now will remain until Oct. 14 while the USTR office reviews whether to extend the carve-out for six months. The U.S. government excluded protective gear from China tariffs to help alleviate a domestic shortage at the start of the COVID pandemic. 

The Trump administration in four stages imposed significant tariffs on $550 billion worth of annual Chinese imports for alleged discriminatory trade practices. President Joe Biden has left the so-called Section 301 tariffs in place despite complaints that they are raising prices for Americans and are ineffective in changing China's behavior. Officials have even hinted more products could be added to the tariff list.

The American Apparel & Footwear Association on Sept. 27 said the medical care product exclusions should be extended much longer and urged the Biden administration to add reusable woven surgical and isolation gowns to the COVID-19 list because they are greatly needed by hospitals and health care workers.

And the AAFA is asking the White House to go further, saying across-the-board tariff relief would help manufacturers, farmers and retailers offset extraordinary freight costs this year due to the clogged ocean supply chain that has more than doubled transit times of goods from Asia and forced vessels to wait two weeks for a berth at major U.S. ports.

"This holiday season — what should be a time of great celebration — will be marred by empty store shelves, inflation, and lost U.S. jobs. And the interconnected value chains in our economy mean that this pain will be widely felt as companies and communities who thought they were insulated become increasingly exposed to these damages," the AAFA said in a letter to Trade Representative Katherine Tai last week.

Reinstating exclusions and suspending the application of all 301 tariffs going forward, it argued, would save millions of dollars for companies hit hardest by the shipping crisis and alleviate the shortage in truck chassis, caused in part by the tariffs imposed on the wheeled metal frames.

Earlier this year, the Department of Commerce ruled that 220% tariffs could be applied to imported chassis from China because Chinese manufacturers had sold them at less than fair value.

"While these actions won't expedite goods through our troubled port infrastructure — for that we need quick and decisive action by other government agencies — it will free up resources companies need today to manage the historic freight costs and other transportation surcharges they are now experiencing. This relief will be a crucial lifeline, keeping companies in operation and employing U.S. workers while we also work to ease port traffic and address other supply chain challenges," the AAFA said.

In a separate letter to President Biden, the trade association asked for extra federal help to alleviate costly port delays, including potential incentives for states to use the National Guard and/or utilize U.S. Navy ports to help unload cargo.

As for the general exclusions, the focus of the evaluation will be on whether particular products remain available only from China, the USTR's office said. In addition, the agency will consider whether reinstating or denying, the exclusion will result in severe economic harm to the applicant or other U.S. interests, including manufacturing output and critical supply chains, as well as the overall impact of the exclusions on the goal of changing China's trade practices. A public comment period on the proposal will last through Dec. 1.

Biden's China Trade Policy

In a speech Monday outlining the administration's new approach to China, Tai announced she will challenge Chinese officials for not meeting commitments under the Phase One trade agreement made under Trump, which is set to expire at the end of the year, and use tariffs and cooperation with allies to pressure China on its non-market policies and practices.

Tai said China has not followed through on purchases of U.S. goods, and that the agreement didn't fundamentally address China's subsidizing of targeted industries or forcing foreign companies to transfer technology to joint venture partners. 

"Those policies have reinforced a zero-sum dynamic in the world economy where China's growth and prosperity come at the expense of workers and economic opportunity here in the U.S. and other market-based, democratic economies," Tai said at the Center for Strategic and International Studies in Washington.

"That means taking all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition. We need to be prepared to deploy all tools and explore the development of new ones, including through collaboration with other economies and countries. And we must chart a new course to change the trajectory of our bilateral trade dynamic."

In an interview with Politico, Tai indicated that enforcement may take precedence over engagement. She said the rarely used 301 provision of the Trade Act employed by Trump is a tool for creating effective policies, "and something for us to build on and to use in terms of defending to the hilt the interests of the American economy, the American worker and American businesses and our farmers, too."

Many trade observers agree China plays unfairly but are waiting to see what concrete actions the Biden administration will take given that the initial tariffs haven't achieved their desired effect.

Trade groups representing importers expressed disappointment with the White House's plan to continue collecting tariffs.

"At a time when industry is struggling with an unprecedented supply chain crisis due to our crumbling infrastructure, economic fallout from a damaging pandemic, and unprecedented freight costs, it is distressing that the administration has chosen to continue to subject U.S. companies to these damaging taxes. Although restarting an exclusion process is an important step forward, the far better course would have been to discontinue use of these tariffs entirely," AAFA President Steve Lamar said.

"The tariffs currently being imposed on clothing, footwear, and travel goods were part of a failed trade war strategy. As we have learned during the past couple years, trade wars are not ‘good and easy to win' and, in fact, such tariffs are hurtful to American consumers, American workers, and American business."

In a statement, the National Retail Federation called Biden's trade strategy toward China "lackluster at most," adding that "it will further inflict unnecessary damage to the American economy and retail supply chains. … Because these tariffs touch products in nearly every sector of the U.S. economy, they also ultimately force consumers to pay higher prices.

"It is critical that the administration initiate immediate discussions with China so we can level the international playing field and bring an end to the global supply chain disruption."

Subscribe to FreightWaves' e-newsletters and get the latest insights on freight right in your inbox.

Click here for more FreightWaves articles by Eric Kulisch.

RECOMMENDED READING:

LA/LB ports to test expanded night, weekend hours

Biden picks former DOT secretary as port czar

UP temporarily stopping eastbound container service to Chicago

Image Sourced from Pixabay