By Omar S. Nashashibi, co-founder, The Franklin Partnership, LLC
Members of the American Mold Builders Association (AMBA) sent a loud message to the Biden administration in January 2023 – keep the 25% tariffs on imported Chinese industrial molds and dies in place. More than 50 members of the AMBA filed formal comments with the Office of the US Trade Representative (USTR) calling on them to continue defending American mold builders by keeping the Section 301 tariff action in place.
The Biden administration is required by law to review the tariffs after four years, a process triggered in July 2022. At the time, AMBA successfully lobbied the USTR to keep the tariffs in place as it underwent the full review, despite significant pressure on President Biden to suspend the tariffs during USTR’s review. With the tariffs still in place today at a 25% rate, 67% of AMBA members reported that they have taken on new business previously sourced from China as a result of the Section 301 action covering industrial molds.
AMBA supported its members who filed by submitting its own comments to USTR on behalf of the industry. In its filing, the association told the Biden administration that 63% of members reported that lifting the tariffs would result in reducing their workforce or lead to a hiring freeze. Furthermore, 78% of members reported that they have lost work in the past 24 months due to unfairly low-priced foreign competition.
While hundreds of mold builders currently exist in the US, imports from lower price countries, such as China, continue to cause injury to the domestic industry. The 25% tariff on molds and dies imported from China has leveled the playing field for US manufacturers. Before the tariff, Chinese shops sold molds and dies for as much as 40% lower than a comparable product manufactured by a domestic shop. As a result of the tariff, Chinese mold shops reported between a 10% and 30% drop in revenue, helping level the playing field with the tariffs acting as a countermeasure against the subsidized Chinese molds and dies.
Even by the White House’s own admission, AMBA members play an essential role in the supply chain. Industrial molds appear in the 100-day review under White House Executive Order 14017, “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-based Growth.” This is an important recognition by the federal government that industrial molds are a critical component of the supply chains, without which, manufacturers could not produce their plastic and other products in the US for national and economic security.
Mold capacity utilization rate in the US is currently around 72%, putting American companies in a strong position to meet current and future domestic demands. However, most of those seeking to lift the tariffs are simply chasing a lower price, and not as they often claim, unable to source in the US.
USTR received 1,497 comments from the public as part of this formal review process. Sources indicate it will take several months for government officials to sort through and analyze the input, which means a decision on whether to remove the tariffs on all or some of the Chinese imports is still further off – possibly into the summer of 2023. The Biden administration is under considerable pressure to make changes and not simply continue former President Trump’s tariff policy.
Former President Trump imposed the Section 301 tariff action starting in July 2018, to counteract Chinese IP theft and forced technology transfer. The Biden administration is conducting this review to determine the effectiveness “in obtaining the elimination of or in counteracting China’s acts, policies and practices related to technology transfer, intellectual property and innovation.”
AMBA responded to the question by saying that the tariffs serve as a mechanism to deter US manufacturers’ joint ventures in China, reducing the opportunities for IP theft and forced technology transfer. Manufacturers report that OEMs and suppliers are less interested in joint ventures in China as a direct result of the tariff action and, more importantly, that the tariffs also act as a deterrent from US businesses sourcing from China and incentivize the reshoring and onshoring of manufacturing to American mold manufacturers.
Few believe that USTR will lift all the tariffs, which cover more than 10,000 imports. It could, however, choose to remove tariffs on some imports while restarting an exclusion process, allowing importers to request an 18-month suspension of the 25% rate on a select list of goods. This is why AMBA mobilized its members last summer, and again this past winter – to make sure the White House hears the voice of the industry when it makes a decision on the tariffs later this year.
Aside from USTR’s review, China is taking center stage as a major focus of both political parties on Capitol Hill. In January, Republicans created a new US House of Representatives Select Committee on China, chaired by Rep. Mike Gallagher (R-WI). Officially known as the Select Committee on Strategic Competition Between the United States and the Chinese Communist Party, both Democrats and Republicans will serve as they formulate strategies on a range of issues from economics and trade to defense and technology.
The committee likely is one of the few bipartisan actions that may be seen in the US House of Representatives in these early months of this new 118th Congress. Whether they can put forward legislation that can clear both the House and Senate remains a serious question. And what would that legislation look like? AMBA is well-positioned to work with the new committee and already has engaged with some of its members in the past on the importance of the Section 301 tariff action.
Few question that creating the committee only is going to further increase tensions between Beijing and Washington. The Biden administration is continuing to place export restrictions on American shipments to China and sources indicate they are in initial talks with the European Union on a semiconductor technology pact.
Taken together, all these actions point to the Biden administration making some type of decision on a pathway forward on the Chinese tariffs. AMBA built momentum across two administrations since 2019, first to reinstate the tariffs on Chinese molds and then lobbying for them to remain in place. The AMBA members who filed comments and the lobbying efforts of the association have positioned the industry well, in the effort to keep the tariffs in
place. This summer could show the results of this rally in support.
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.