By Omar Nashashibi, The Franklin Partnership, LLC
As the November 2020 election neared, word spread throughout Washington, D.C. international trade circles that China preferred then-Democratic candidate Joe Biden win the White House over President Donald Trump hoping for more stability in relations. Fast forward eight months and the word spreading throughout those same trade circles is that China is concerned about the progress now President Biden is making uniting overseas allies against Beijing.
The Washington rumor mill is as old as this city itself; but when looking at the current situation, the facts are clear – tariffs on China remain in place today as they did under the previous administration. The American Mold Builders Association (AMBA) and manufacturers from around the country fought to reinstate 25% tariffs on imported Chinese plastic injection molds, which today are among those 7,000 tariff lines still in place.
The Biden administration, in its first six months in office through July, held only two senior-level meetings with Chinese counterparts, with little progress made and even less direct discussion on lifting the tariffs. For importers, their frustration over that lack of progress is growing evident by their efforts on Capitol Hill recently.
Dozens of groups are actively lobbying the Biden administration to lift the tariffs on Chinese imports or at the very least restart an exclusion process allowing importers to request a waiver from the 25% or 10% tariffs on that product. Going further, they are working to secure language in pending supply chain legislation to automatically extend expired exclusions, including the one on plastic injection molds, thereby lifting the 25% tariffs through December 2022.
The AMBA and its allies on Capitol Hill, particularly House Democrats, are rejecting efforts to unilaterally extend expired tariffs without allowing domestic industries to respond on whether they have the capability to manufacture in the US the imported product. The pressure is clearly building on both sides with 40 Senators and 102 US Representatives sending a letter to President Biden to reopen the exclusion process for these Section 301 China tariffs.
Many in Washington do expect the US Trade Representative (USTR) to restart an exclusion process at some point, exactly when remains unclear. However, if USTR does open the online portal allowing importers to request an exclusion from the tariffs, sources do indicate that the Biden administration will put its own imprint on a process created by the previous administration.
Reviewing a July 2021 Government Accountability Office report on USTR’s internal procedures for making tariffs exclusion and extension decisions help provide some insight into the process itself. The non-partisan government report found that from 2018 to 2020, US importers submitted roughly 53,000 exclusion requests to USTR for specific products covered by the tariffs, of which 46,000 USTR denied.
Of those 87% rejected, 69% failed to show that tariffs caused them severe economic harm and another 23% did not demonstrate that the product was only available from China. When first granted the exclusion for the plastic injection mold tariffs, importers stated a lack of availability, and the Trump administration subsequently granted the requested exclusion, which accounted for one of the roughly 7,000 tariff exclusions granted. After a significant lobbying campaign, AMBA worked to reinstate the 25% tariffs, which remain in effect today. The exclusions saved importers $14 billion in tariffs over the past several years, according to the report.
The GAO also “found inconsistencies in the case files we reviewed, particularly in areas where USTR did not have written procedures to explain its process.” It also stated that “USTR lacks reasonable assurance that it consistently followed its processes” without appropriately documenting the roles and responsibilities of reviewers.
Supporters of lifting the tariffs and critics of the exclusion process will point to the 86-page report to lift the restrictions on imports and make changes to how USTR reviews requests to avoid paying the tariffs on Chinese imports, including molds and dies.
While many importers understand the political realities in Washington, D.C., and see lifting all tariffs unilaterally and immediately as highly unlikely, they continue to pressure the Biden administration to take some form of action. Sources indicate that the USTR is still conducting a review of the tariff exclusion process and trade policy towards China in general.
President Biden on the campaign trail stated that he would reach out to allies in Europe, Japan, India and Australia to develop a multilateral approach to Chinese trade, human rights abuses and military expansion. He remains committed to that strategy, despite some resistance from the European Union over restricting financial services and some goods trade with China, as its consumer class continues to grow. Leaders in the Group of 20 (G20) largest industrialized nations will meet in late October and the administration hopes to increase pressure on China heading into those meetings.
Time is running short to complete the “top to bottom” review of China policy the USTR said it hopes to finalize prior to the end of the year – especially with the G20 serving as a midway point that includes Beijing. For those looking for action on China and tariffs, many are closely following whether USTR might make an announcement at least reopening a tariff process by the end of September.
In related tariff news, the Biden administration also continues to maintain the 25% tariffs on imported steel and 10% on aluminum from global sources, including allies in Europe, Japan and elsewhere. The White House is committing to reaching a solution on the steel and aluminum tariffs with the EU by November 1, 2021. However, sources indicate that a solution in the eyes of USTR is not simply terminating the tariffs, but possibly replacing them with some other form of protection for the US steel and aluminum industries.
All these negotiations place a lot on the plate of US officials as they manage tariffs against the very national security allies that they hope to persuade in a quest to check China’s rise. USTR is known by Washington insiders as one of the leanest and efficient government agencies, only having roughly 200 employees. Many of those senior officials come from Capitol Hill or have long backgrounds working in the nation’s capital on trade issues and are no stranger to concerns over China and the steel and aluminum tariff wars.
For now, the Biden trade team continues the policy of the previous administration by maintaining tariffs on China despite the strong lobbying efforts by US importers to lift the protections for US manufacturers. Regardless of whether China preferred Trump or Biden win the White House, the immediate result remains the same – the tariffs continue.
Omar Nashashibi is a Founding Partner at The Franklin Partnership, LLC, a bipartisan government relations and lobbying firm retained by the American Mold Builders Association in Washington, D.C.
