Washington Update

President Donald Trump on Tuesday followed through on his threat to increase the baseline tariff rate on all Chinese products from 10% to 20%, effective immediately. The announcement cites China’s inaction to stop the flow of fentanyl precursor chemicals to North America. The administration has not indicated plans for an exclusion process.

The White House last Friday announced the America First Investment Policy, a national security-focused presidential memorandum that promotes investments from allies while restricting investments from adversaries, notably China.

China on Tuesday announced new tariffs and export controls in response to the United States imposing a 10 percent tariff, on top of existing tariffs, on all Chinese imports. Despite speculation that President Donald Trump and President Xi Jinping would speak by phone this week and potentially ease their respective tariff rulemakings, a call has not taken place and Trump indicated on Tuesday that he was “in no hurry” to do so.

President Donald Trump’s Cabinet is aligned on a need for more tariffs, though the administration has yet to outline exactly when and how to do so, including determining which products and countries to target, as well as how high to set the duties. White House Press Secretary Karoline Leavitt indicated this week that Trump plans to levy tariffs on Mexico and Canada on February 1 and that he is still “considering” imposing a 10 percent tariff on all Chinese goods on the same day.

President Donald Trump opted not to raise tariffs on China during the first week of his administration. Instead, he on Monday issued a regulatory freeze and directed executive department heads to review all new rules published under the Biden administration that have not taken effect, a move that could halt several rules with operational impacts for USCBC member companies.  The White House also issued a trade policy memorandum later that evening directing federal agencies, primarily the Department of Commerce, Treasury, and the Office of the US Trade Representative, to conduct a top-to-bottom review of US trade policy.

The Department of Commerce’s Bureau of Industry and Security on Wednesday issued the Framework for Artificial Intelligence Diffusion interim final rule, geared towards curbing China’s access to cutting-edge chips used in AI. The new rule imposes country-specific export caps on chips needed to train AI models, proposing a three-tier licensing system that determines the type and quantity of advanced chips a country can procure based on its relationship with the United States.

The Department of Defense (DOD) on Monday added prominent tech entities Tencent and Contemporary Amperex Technology Co., Limited (CATL), along with dozens of other Chinese companies, to its 1260H list of Chinese military companies. According to a department readout, these entities were added because of their involvement in China’s military-civil fusion strategy.

President-elect Donald Trump led the charge on Wednesday to convince House Republicans to abandon a bipartisan compromise bill to fund the government until March, increasing the chances of a government shutdown beginning today. The continuing resolution (CR), which was released on Tuesday, included multiple China-related provisions, including an outbound investment review proposal.

The Commerce Department’s Bureau of Industry and Security (BIS) on Thursday released a comprehensive package of final rules designed to further impair China’s ability to produce advanced semiconductors.

As secretary of commerce, Lutnick is slated to lead the Trump administration’s “tariff and trade” agenda, especially if he is indeed given authority over certain functions of the USTR.