WITA Panel Says Section 301 Tariffs Permanent Fixture; Predicts Exclusions Unlikely to Continue

Many importers who were hit with Section 301 tariffs six years ago expected they would be rolled back in 18 months or two or three years, said Nicole Bivens Collinson, director of Sandler Travis's international trade and government relations practice. Then, once that didn't happen, they thought they'd see what happened in the Biden administration.

She said that the inflationary impact of the tariffs was delayed, as first Chinese firms whose exports faced tariffs dropped prices to stay competitive and, then, companies absorbed the costs. But, she said, eventually that gets passed on to consumers.

Now, with every product that was on the Trump tariff target list continued after the Office of the U.S. Trade Representative's four-year review at either 25% or 7.5% -- and a few categories newly hit, or with hiked rates -- reality is setting in.

Bivens Collinson said she always believed the higher tariffs would stay for decades -- and now importers are recognizing that, too.

The only thing that remains unresolved is whether tariff exclusions that expire May 31 will be renewed.

Bivens Collinson led a discussion among attorneys, think tank members and lobbyists on the fall-out from the Biden administration decision to maintain or increase the Trump tariffs, hosted by the Washington International Trade Association.

American Clean Power Vice President for Trade and International Competitiveness Vanessa Sciarra, who represents solar, wind and utility-scale battery consumers, agreed, saying if people think the tariffs will go away after a few more years, they're deluding themselves.

"These tariffs are here to stay," she said. "Industry needs to think how they’re going to manage that."

She acknowledged that there are critical items -- such as machines used to make solar panels -- that are only available from China, and that China is known to weaponize such dependencies. "There are levers the Chinese can pull that can hurt us," she said.

Sciarra said it took months of conversations to convince the White House that rolling back 25% tariffs on those machines supports its goals of expanding domestic solar manufacturing, and that keeping them undermined the production tax credits it offered in the Inflation Reduction Act.

While she said she hopes Bivens Collinson's clients can renew their exclusions, she acknowledged, "This particular USTR is opposed to exclusions generally; they don’t think it should be extended."

The Alliance for American Manufacturing has advocated for Section 301 tariffs from the start. AAM President Scott Paul said exclusions were granted years ago with the expectation that the firms covered by them would look for alternative sources for their inputs.

"In some cases that has happened, in other cases, they’ve relied on it as a crutch," he said. "It’s time to look for another source of supply."

Information Technology Industry Council Director of Trade Policy Kyle Johnson said the administration tells his members: "Just don't buy from China," and they don't understand what that means, practically.

He said the administration's habit of announcing a week before exclusions are set to expire whether or not they're going to continue is not congruent with how businesses operate.

More broadly, Johnson said the administration "really missed an opportunity to do what they said they wanted to do -- which is make [the tariffs] more strategic."

He said the report from the Office of the U.S. Trade Representative reflected more than 1,000 stakeholder comments, saying the tariffs made businesses less profitable, led to job losses, fueled inflation. He said the report also acknowledged that "the policy has not been very effective at addressing the root issue" in China.

But its "conclusion was nothing needs to change on the existing tariffs."

Former USTR official Ed Gresser, director for trade and global markets at the Progressive Policy Institute, reminded listeners that the initial assessment of the cost to the U.S. economy of Chinese intellectual property practices was $50 billion, but the size of the action ballooned as China retaliated.

He said the Trump administration, as it negotiated with China, focused more on trade balancing than IP reform, and he said it did so in a naive way that didn't work.

He said that the Biden administration seems to be acting in the service of the idea that some industries are so crucial -- such as solar and electric vehicles -- that domestic production must be nurtured or defended, even if it means consumers will pay more as a result.

But, he said, the Section 301 tariffs "cover hammers and underwear and bicycles, all kinds of things that are not strategic and sensitive at all." The higher costs' contribution to inflation may not be large -- some manufacturers haven't passed the costs onto consumers -- but he said it has consequences. Manufacturers in the U.S. have higher costs than foreign competitors that don't pay this tax on inputs, and therefore they can't export as easily.

He said "the indiscriminate extension of all these tariffs" is based on the argument that because China hasn't improved its conduct, they don't deserve to get a break on the tariffs. (AAM's Paul defended the wholesale extension on those grounds, as well.) Gresser said it really means we don't want to admit it's not going to work, and he argued, "that's not a good enough reason" to maintain higher costs for U.S. consumers.

Although the Section 301 target list was not made more strategic, some panelists noted that the timing of some of the tariff hikes, or other recent trade decisions from the administration about Chinese inputs were more nuanced, and showed an understanding of commercial realities.

Sciarra said the fact that the tariffs on large batteries to store renewable energy won't climb from 7.5% to 25% for two years was because her group was able to show how domestic production of those batteries won't be large enough to meet U.S. demand until 2026.

Zero Emission Transportation Association Executive Director Albert Gore III said that the recent Treasury Department rules on foreign entities of concern (see 2405030060) are stringent, but balance the desire to remove dependency on China with what works for battery manufacturers ramping up in the U.S., Mexico and Canada.

"The tariffs are obviously another part of that strategy," he said, and the fact that some increases will be delayed shows "a similarly balanced approach."

The panel was asked about the danger that China will evade a 102.5% tariff on its EVs by manufacturing in Mexico, and Gore said he thinks that's a red herring, because how those companies source parts in China makes it difficult for them to receive USMCA tariff benefits. "I think there’s virtually no way a Chinese manufacturer could satisfy that regional value requirement," he said.

Paul said that's true, but that cars assembled in Mexico could qualify for the 2.5% tariff rather than 102.5% -- and he said Chinese firms setting up in South Korea could also be a threat to U.S. production.

"I do think that the 100% tariffs on Chinese EVs are necessary, but not sufficient," he said.

Gore said the U.S. has some diplomatic leverage with Mexico to talk about Chinese investment there.

Sciarra noted that in 2026, the USMCA gets its sunset review: "2026 is going to be a big year for this conversation."