301 Tariffs Overview and Recent Action
Section 301 of the Trade Act of 1974 authorizes the Office of the U.S. Trade Representative (USTR) to investigate and impose trade sanctions on foreign countries that violate trade agreements and burden U.S. commerce and consumers with discriminatory trade practices. Prior to the creation of the World Trade Organization (WTO) in 1995, the U.S. primarily used Section 301 to pressure foreign countries to open their markets to U.S. exports. The creation of the WTO, which included an enforceable dispute settlement mechanism, significantly reduced the use of Section 301 as a trade tool until recently.
In 2017, however, as a part of the Trump Administration’s aggressive policies toward China, USTR launched a Section 301 investigation that justified duties due to China’s policies and practices of 1) forced technology transfer requirements; 2) cyber-enabled actions to acquire U.S. IP and trade secrets; 3) discriminatory and nonmarket licensing practices; and 4) state-funded strategic acquisition of U.S. assets.
As a result, throughout 2018 and 2019, USTR issued four iterations of new tariffs on products from China totaling $550 billion in Chinese imports. China responded to these escalating tariffs with its own protectionist policies and by initiating several WTO disputes against the U.S.
Some products, however, have escaped the higher duties under an exclusion process. While the Trade Act of 1974 doesn’t explicitly outline a formal tariff exclusion process, in 2020, USTR initially allowed exclusion requests for certain medical products that were in short supply during the COVID-19 pandemic and then subsequently expanded that exclusion to apply to other products. Many of these exclusions have remained in place on eligible products through multiple extensions. Existing exclusions are set to expire on May 31, 2025.
In 2022, the Biden Administration began the four-year statutory review of the tariffs, which included an opportunity for industries to request their continuation. USTR requested public comment for interested parties to submit information on the effectiveness of the tariffs and their effect on the U.S. economy and consumers as it considered whether to keep the tariffs in place.
After multiple extensions, the administration released the results of the review on May 14, 2024, which concluded that the tariffs were effective and increased tariffs were needed in certain industries to incentivize China to change its behavior regarding forced technology transfers and intellectual property issues and to protect domestic industries of strategic interest to the United States. Certain industries, such as electric vehicles (EVs), steel, semiconductors, solar cells, batteries, medical products, and critical minerals were specifically targeted with higher tariffs ranging from 25% to 100%.
Considerations for Congress
In 2017, when the 301 Tariffs were announced, many members of Congress in both parties criticized the protectionist move. Increasingly, however, Congress (including members who have long been free-trade supporters) has supported the tariffs against China due to the deteriorating relationship between the U.S. and China and concerns over China’s market manipulation that gives China an unfair advantage in international trade.
At the same time, individual members of Congress have often supported exemptions for the tariffs, particularly for products and industries that reside in their districts and states that are hoping to ease the financial burden for companies and consumers.
In recent years, some members of Congress have introduced legislation that would amend the Trade Act of 1974 to update Section 301, especially with its more frequent use as a trade policy tool. Specifically, much of the proposed legislation has been directed at streamlining or formalizing the exclusion process to increase transparency and consistency, as well as ensuring the tariffs are levied in line with congressional intent.
Finally, given the increased scrutiny of China’s trade practices and the impact of the 301 tariffs on multiple industries of the U.S. economy, we expect Congress to hold oversight hearings on the process, implementation, effectiveness, and potential needed reforms of Section 301.
Who We’re Watching
U.S. Trade Representative Katherine Tai: As the head of USTR, Ambassador Tai serves as the president’s principal trade adviser and negotiator on all trade issues, including leading the agency’s investigation and review of the 301 tariffs. With USTR's recent announcement to retain and expand the 301 tariffs against China, Ambassador Tai will be the administration’s primary spokesperson on the tariffs, including in front of any congressional hearings.
House Committee on Ways and Means and Senate Finance Committee: As the leading congressional committees overseeing international trade issues, the House Committee on Ways and Means and Senate Finance Committee have jurisdiction over USTR and Section 301 Tariffs. Of particular note, both House Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Chairman Ron Wyden (D-OR) issued statements of support for the decision to extend and expand the Section 301 tariffs, further demonstrating the support among members of Congress to pursue aggressive trade action against China. We will be watching to see if these committees hold oversight hearings following the Biden Administration's recent expansion of 301 tariffs.
House Select Committee on China: Chairman John Moolenaar (R-MI) and Ranking Member Raja Krishnamoorthi (D-IL) have both been supportive of Section 301 tariffs to address China’s unfair and uncompetitive trade practices. Given the committee’s specific focus on the relationship between the U.S. and China and the committee's recommendation of increased tariffs on Chinese imports, they will be important congressional voices on 301 tariffs.
The Next Administration: Regardless of the outcome of the upcoming November election, we expect the 301 tariffs against China to remain in place and possibly continue to be expanded. Reportedly, the Biden Administration is considering additional tariffs against China, especially on products and industries related to economic and national security. Former President Donald Trump has proposed significant tariff increases on Chinese goods, as well as goods from other countries, if he returns to office.