Tai Tells Businesses to Be Patient About Section 301 Tariff Changes

U.S. Trade Representative Katherine Tai drew a distinction between 35% tariffs on Russian goods, which she said are designed to punish that country's war of aggression, and 25% (or 7.5%) tariffs on Chinese goods, which she said are not punishing tariffs.

At a question-and-answer session at the National Association for Business Economics annual meeting Oct. 11, Tai said that she often is asked by Asian officials, "Why do you continue to punish China with tariffs?"

Tai said the Section 301 tariffs on most Chinese imports are "playing-field-leveling, fairness, balancing tariffs."

Tai was evasive about what criteria might be considered for retaining tariffs on any particular product, or the timeline for the Section 301 review, required by statute after four years. But she told the audience they need to keep in mind the tariffs' utility to serve "the need for overall realignment, re-balancing, in the U.S.-China trade relationship in particular." She said politicians' desire to change the U.S. trade relationship speaks "to the need for the strategic deployment of these playing-field-leveling tariffs."

She acknowledged that "trying to move to a different reality, where we have a realigned and more strategic and balanced relationship with China," and the reconfigured supply chains that would require, takes time. So the analysis of the continuation of Section 301 tariffs includes thinking about "what that transition looks like and how to get there."

Tai also was asked by an audience member why the administration won't at least temporarily pause the tariffs on Chinese goods, given the problems with inflation.

"The problems that we have with China … they have been many years in the making. We shouldn’t be impatient or too anxious about what our next step should be," she said. And, with regard to inflation, she said the entire world is struggling with elevated inflation and there were many reasons for its climb. "Whatever part these particular tariffs might play is really quite small," she said.

The moderator asked Tai what she hears from top trade officials in other countries, and she said, "We are all focused on trying to successfully navigate our way out of this period of instability." She said that among advanced economies, sustainability and proliferating geopolitical constraints are the major themes. She said that among developing countries, while they're also interested in sustainability, resilience and inclusivity, they also want more foreign investment and growth.

Tai was asked if the era of free trade agreements is over, and she said "we have not sworn off tariff liberalization," but that policymakers need innovative approaches to create more fair and durable trade policy. "We’re not going to do the thing that I feel very strongly has brought us to the point we are right now," she said.

"The [Indo-Pacific Economic Framework for Prosperity] IPEF is designed not to include tariff liberalization. This is a feature and not a bug. I’m not embarrassed about it," she said.

"Tariff reduction and market liberalization are not goals in and of themselves," she said, but they could have their places if they serve the goal of resiliency, sustainability and more inclusive economic benefits.