Delayed Tariff Increases May Signal Improved Ties

The Office of the United States Trade Representative (USTR) announced on August 31 it will further delay the implementation of tariff increases on Chinese-made products including electric vehicles (EVs), solar cells and semiconductors under Section 301. This is the second time that the USTR has delayed these tariff increases. Section 301 of the U.S. Trade Act of 1974 provides a statutory means by which the U.S. imposes trade sanctions.

In May, U.S. President Joe Biden announced the tariff on Chinese EVs would be increased to 100 percent, and that on semiconductors and solar cells to 50 percent, as well as new 25 percent tariffs on lithium-ion batteries and critical minerals to make those batteries, steel and aluminum products and ship-to-shore cranes. The new tariffs were initially scheduled to take effect on August 1. But the USTR said it needed more time to review more than 1,100 industry comments and set a new deadline of August 31, which has now been further postponed to September or later.

The USTR’s decision may be related to the recent visit to China by U.S. National Security Advisor Jake Sullivan and an expected summit between China and the United States. The U.S. may be seeking to express sincerity in areas of common concern between the two countries, including economy and trade, which suggests a further positive trend in China-U.S. relations.

Tariff increases on Chinese products made under Section 301 for political purposes have a negative impact on the United States itself. In addition to the U.S. Government drawing criticism for trade protectionism, the global competitiveness of U.S. EV, solar cell and lithium-ion battery businesses, which are already lagging behind their Chinese counterparts, will be further weakened due to the limited technology inflow caused by the tariff increases.

The USTR’s decision to delay, after collecting 1,100 industry comments, suggests the tariffs were not welcomed by the U.S. business community. Many U.S. companies are strongly opposed to the tariff increases, fearing they will raise costs, reduce employment and weaken their competitive advantages. The American Association of Port Authorities, for example, said the new tariffs on Chinese-built ship-to-shore cranes would result in significant cost increases, affecting port development and competitiveness.

The Democratic Party, represented by Biden, has to balance the needs of diverse political forces in the run-up to the presidential election, including the votes of blue-collar workers and financial support from Wall Street and Silicon Valley. The decision to delay tariff increases may also be aimed at reaching a certain consensus inside and outside the party to avoid intensifying conflicts. Moreover, since the U.S. economy is facing challenges including inflation pressure and supply chain bottlenecks, continued high tariffs could exacerbate price hikes and affect consumers’ daily lives.

The U.S. decision to delay tariff increases is of positive significance. The most important impact is that it will help stabilize global market sentiment, at least in the short term, reducing the uncertainty within the global market brought by the U.S. tariff increases. This decision will also help ease economic and trade tensions between China and the United States and create conditions for further dialogue and cooperation.

Whether the United States can cancel its unreasonable tariffs on Chinese products and whether China-U.S. trade can return to normal are a focus of attention not only for Chinese and U.S. entrepreneurs, but also for the entire international community. Indeed, unilateral tariffs disrupt the global trade order and affect the stability of the multilateral trading system.