US-China Business Council President Expects Section 301 Tariffs Will Stay at Least Through 2022

The president of the U.S.-China Business Council told an online audience of customs brokers that he sees them as the problem solvers in trade, and that they're going to continue to have plenty of problems to tackle over the next few years. Craig Allen, who spoke to the National Customs Brokers and Forwarders Association of America April 14, said that the U.S.-China relationship, while intensely interdependent economically, is marked by mistrust and antagonism, and “the trend lines are not good.”

Allen said during meetings with officials in the Office of the U.S. Trade Representative, the Commerce Department and the White House he asked if they will reopen applications for product exclusions for Section 301 tariffs. At USTR, he said, “I think they understand the importance of it, but I don’t have a clear answer on that yet.”

As to the future of the tariffs themselves, he also doesn't get a direct answer, just that the policy is under review. “I do think what we have seen thus far is indicative at least to me that there won’t be a lot of change,” he said. “[USTR Katherine] Tai has said she is not going to yank the tariffs, she believes they give her leverage.”

He says his trade group, which represents 243 U.S. companies that operate in China, believes they should all be removed in exchange for market access, and that should be achieved before the end-date of the phase one agreement in February 2022. He said his companies see the phase one agreement as a big success, with significant improvement in intellectual property protection, agricultural market access and access for U.S. financial services companies.

The tariffs hurt U.S. manufacturers and have cost jobs, he argued. “I’m not finding a lot of purchase with that argument when I talk to USTR, Commerce, the White House,” he said.

“The Biden administration has inherited a set of policies it’s not so uncomfortable with, the costs have been largely paid already,” he said. “Looking at this from Joe Biden's perspective, he needs to maintain a Democratic Congress in 2022, and he doesn’t want the Republicans to criticize him for being too nice to China.”

Allen is concerned that tension is so great between the U.S. and China that military conflict cannot be ruled out. “The more the criticism is articulated [on Xinjiang, Hong Kong and Taiwan], the more strident the Chinese side is getting,” he said.

Allen said he's also asking the administration, “What about reshoring and supply chain resiliency? What’s the game plan?” He said he tells the White House: “Supply chain resiliency is great, but supply chain efficiency is also necessary; if your supply chain is resilient but not efficient, you're going to go out of business.”

He said he told them if they feel increased supply chain resilience is critical, they should provide incentives to companies that adjust how they import and produce. He noted that there have been several bills introduced in Congress that offer incentives for domestic production of high tech goods that are currently concentrated in China and Taiwan. “Work with the private sector, don’t work against the private sector,” he says he tells them. And, he said, most of the production in China by his companies is for sales in China and other Asian countries, not for serving U.S. consumers. “Not everybody in the Biden administration is going to buy that argument, but that’s my story, and I’m sticking to it,” he said.