US and China Fire Shots in Mounting Trade Dispute

By USCBC Staff

The United States and China have both fired warning shots on the growing field of bilateral trade disputes, though the most significant battle is likely still weeks away. While both sides have announced proposed tariffs on $50 billion in imports in relation to the USTR’s investigation into China’s intellectual property and technology transfer policies, neither will be implemented immediately.

On April 3, the Office of the US Trade Representative (USTR) released its proposed Section 301 tariffs for public comment. If implemented, the tariffs would cover approximately 1,300 tariff lines. Written comments are due to USTR by Friday, May 11, 2018; a public hearing on the proposal will be held on May 15. In a news interview, USTR Robert Lighthizer said that he may not act on the proposal for 60 days, though in comments on Wednesday, a USTR spokesperson suggested that action may come soon after the close of the comment period.

China responded on April 4, announcing a potential 25 percent tariff on $50 billion of US exports, matching the United States’ proposed tariffs. Targeted products include agriculture, autos and aircraft. USCBC’s initial translation of the retaliation list can be found here; the original notice in Chinese can be found here. China’s announcement indicated that the implementation date for the tariffs would be announced separately, but a Ministry of Commerce (MOFCOM) spokesperson said that the date would depend on when the United States implements its own tariffs. US tariffs may not go into effect until June, providing an opportunity for the two governments to reach a negotiated solution.

While the MOFCOM statement announcing the tariffs called the US action illegal under World Trade Organization (WTO) rules, China indicated it was acting to protect its rights using its own domestic laws, primarily the Foreign Trade Law. The United States used a similar justification for its own actions, filing a WTO dispute settlement case on some issues, but largely relying on US trade law as the basis for unilateral tariffs.

At an April 4 press conference in Beijing, Vice Minister of Finance Zhu Guangyao justified China’s actions in response to the United States’ move on Tuesday night. “China has never succumbed to external pressure. External pressure will only make the Chinese people more focused on economic development,” Zhu said.

USCBC President John Frisbie released a statement after USTR’s announcement on April 3, noting that, “China needs to substantially improve market access and competitive conditions for American companies selling to and investing in China in certain sectors, but unilateral tariffs may do more harm than good and do little to address the problems in China’s IP and tech transfer policies.”

Two other actions related to the 301 case are underway. The US filed a dispute settlement case at the World Trade Organization (WTO) on March 23, challenging five Chinese laws and regulations as inconsistent with national treatment obligations in the WTO’s TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement. A final set of US actions, focusing on investment restrictions, is being worked on by the Treasury Department and is due in late May. It is unclear if Treasury will seek public comment before implementation.

The 301 actions on April 3 and 4 came in the midst of other tariff battles between the United States and China. On March 29, China notified the WTO that it may impose tariffs on US imports in response to tariffs the United States imposed on washing machines and solar panels in January. On April 2, China implemented tariffs on $3 billion of US exports in response to the United States’ imposition of a similar value of Chinese aluminum and steel exports to the US.

List of tariffs on the United States, April 4, 2018 (Unofficial US-China Business Council translation):