Cassidy to Soon Introduce Carbon Border Adjustment Tax Bill, Citing China Trip

Sen. Bill Cassidy, R-La., who traveled to China with the Senate majority leader and other senators in mid-October, said what he saw there reinforced his desire to pass what he calls a "foreign pollution fee," a tariff on imports that are more carbon intensive than domestic production. He told International Trade Today that he'll introduce the bill "we think later this month, or maybe early next month."

In 2022, when he first started publicly discussing the idea (see 2209130052), he said using carbon border adjustment taxes can appeal to many sectors of the American electorate -- climate hawks, those concerned with threats from China, those who want to protect the industrial base.

Cassidy explicitly linked his coming proposal to countering Chinese policies that he said use low enforcement of environmental laws as a comparative advantage. He said he thinks it's valid to use tariffs to address that issue, as well as "a strategy of dumping excess capacity from state-owned enterprises onto the rest of the world."

He asked and answered his own rhetorical question: "Is there a role for government to protect U.S. domestic manufacturing from such practices? Absolutely."

Cassidy said that when he was in China, U.S. business leaders told the group that state-owned enterprises are given production goals, and when the products don't have enough buyers in China "then they dump that excess capacity on the rest of the world."

The administration is reviewing Section 301 tariffs on what had been $300 billion worth of exported products before the action, which were imposed to counterbalance Chinese oversubsidization, intellectual property theft and forced technology transfers, as well as retaliatory tariffs from China after the tariff war began.

When asked if he thinks they have been effective, Cassidy said exports from China to the U.S. that are covered by the tariffs are down, and said that the slowdown in the Chinese economy has several contributing factors, "but one of them has been the tariffs."

He said Chinese officials certainly asked about the tariffs, as well, "so people over there think it's contributing" to economic woes. He said that's a testament to the argument "that the tariffs are actually doing something."

The top Republican on the Senate Finance Committee, Mike Crapo of Idaho, also was in the Senate delegation to Beijing. He said the trip didn't change his perspective on the Section 301 tariffs, which is: "They should remain at this time." Back in May, Crapo told International Trade Today that the debate had moved on from two years earlier, when many senators were trying to impel the Office of the U.S. Trade Representative to have a more generous tariff exclusion process (see 2305120033).

More than one-third of the imports by value -- 3,800 8-digit tariff lines -- are subject to an additional 7.5% duty. Some critics of the tariffs say these are the least strategic goods -- they include toys, apparel and other low-skill manufactured goods -- and they were the last to be added to the action. Crapo said those Section 301 duties are too low and should be hiked.

"But that's kind of part of a broader concern I have, and that is I believe that we need to be engaged in much more aggressive negotiations" with China, he said. He said companies they met with talked about how they are vulnerable to capricious government actions in their operations in China, such as through the anti-espionage act and other laws.

Crapo clarified that by aggressive, he doesn't mean hostile. "I just mean much more active trade discussions, to try to reduce the non-tariff barriers that exist and create more free market opportunities."