A 2022 Red Hot Summer

by Omar S. Nashashibi, co-founder, The Franklin Partnership, LLC

In addition to a global heat wave that did not spare the US, Russia and China continued to dominate the headlines here in Washington, D.C. in the summer of 2022. Some supply chain and energy disruptions began to ease, but tensions with China increased, culminating with an announced visit by Speaker Nancy Pelosi to Taiwan.

On the trade front, the American Mold Builders Association used its summer to press the office of the US Trade Representative (USTR) to keep the 25% tariffs on Chinese molds, dies and tooling and to testify before the US International Trade Commission (ITC) on how the tariffs on China continue to help the industry.

The Biden administration is internally deliberating in a very public way whether to keep the 25% and 7.5% tariffs on over 10,000 imports from China. Federal law requires the government to review the Section 301 tariffs after four years – that date falling on July 6, 2022. USTR announced it would continue the tariffs while it conducts the formal review; however, AMBA did not waste time. The association activated its membership, who were among the 327 stakeholders filing comments with the USTR in support of continuing some or all tariffs on Chinese imports.

In its filing supporting the 25% tariffs on molds and dies, AMBA stated that over half of its members took on new business from China after a customer wanted the product manufactured in the US due to the tariffs on imports. AMBA believes amble capacity exists, as according to the US Census, the federal government identified 1,381 industrial mold building establishments as of 2020, over 200 of which are members of the association. Importers continue to claim supply shortages in their ongoing efforts to lift the tariffs.

Sources in Washington indicate that the Biden administration deliberations over how to handle the Trump-imposed tariffs involved whether to keep some, all, or none of the tariffs. Another option also surfaced in September 2021 with increasing support – initiating a new Section 301 tariff action on China, this one focused on State-Owned Enterprises and government subsidies.

While the USTR reviews the comments received in support of the tariffs and considers next steps, importers are anxiously awaiting word on not only the fate of the tariffs but also the restarting of an exclusion process. Previously, companies could petition USTR for a temporary suspension of tariffs on a specific product. With the exclusion portal closed through the summer, pressure continues to build on USTR to restart the process and allow more imports to enter without tariffs.

In a separate review of the Section 301 tariff action, the US International Trade Commission held a three-day hearing in late July to review the impact of the China tariffs on US industry. Congress in March 2022, passed a law requiring the ITC to conduct the investigation and issue a report by March 2023. The ITC heard from roughly eighty witnesses, many in favor of lifting the Section 301 tariffs on China, with AMBA being one of the few groups testifying in support of domestic industry in favor
of the tariffs.

AMBA managing director Kym Conis testified that in a recent survey, 70% of mold builders reported that suspending the 25% tariffs on Chinese molds and dies would have a negative impact on their business, with 44% reporting an immediate negative impact. The ITC Commissioners asked questions of the witnesses as they sought more information on how the tariffs have directly supported American manufacturers.

The ITC will not issue recommendations or make a decision to lift the tariffs; however, its economic study will contribute to the decision-making process and add to the ongoing debate over the effectiveness of the tariffs. Few believe the Section 301 trade action has led China to change its predatory behavior towards the American industry, but AMBA continues to argue that targeted tariffs have supported the industry. However, as AMBA testified, the 25% tariff on Chinese molds still does not fully counter the “China price”, which member companies report is up to 70% below quotes for US molds.

The White House and federal agencies are not alone in their focus on China this summer. In a rare bipartisan vote, the US Congress passed into law legislation to counter China’s technological rise and invest in US advanced manufacturing and the semiconductor industry. After months of tense negotiations, lawmakers sent President Biden the CHIPS and Science Act of 2022, which invests billions of dollars in US manufacturing, including $52 billion over five years to incentivize and support the manufacture of semiconductors in the US.

Sources indicate that Beijing spends roughly $150 billion annually on semiconductors and R&D, but the action by Congress this summer will inject some important government support for the American industry. The new law creates a 25% advanced manufacturing investment credit for investment in semiconductor manufacturing and semiconductor manufacturing equipment. The legislation also provides over $5 billion for workforce training and development, along with other provisions focused on workforce and education.

The attention from Washington on China has not gone without notice in Beijing. Security and economic tensions continue to heat up with at one point this summer, rumors of Chinese military mobilization in response to Speaker Pelosi’s visit to Taiwan. Tensions are unlikely to lessen anytime soon with the US election only months away and many politicians citing the Chinese Communist Party in their campaign ads.

The AMBA is using the attention on China to direct policymakers’ attention towards the Chinese molds, dies and other tooling that undercuts the American industry. The summer has brought opportunity to have all policymaking branches of the federal government focus their attention on China. AMBA’s comments to USTR in June, followed by testimony to the ITC in July, helped reinforce the message that Washington should not let up on China and must keep the 25% tariffs on the products members manufacture in the US.

It is important that the attention on China’s trade policies not end with the summer or with the coming November election. For now, it appears the red hot focus on Beijing only will increase as the Biden administration nears a decision on the 25% tariffs. Stay tuned. n

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.