ITC: US Importers Paid for Trump's China Goods Tariffs

The Lede: U.S. importers bore nearly the entire weight of tariffs imposed on over $300 billion worth of Chinese products during Trump's presidency, leading to increased expenses for American businesses, according to a study by an independent U.S. government entity.

What we know:

• The findings from the U.S. International Trade Commission (ITC) support the longstanding argument that the tariffs negatively impacted American companies, challenging Trump's famous slogan – “China will pay.”
• The study was conducted in response to a directive from Congress, as part of legislation enacted last year, and discovered a nearly equal rise in the cost of U.S. imports after the implementation of the so-called section 301 tariffs.
• According to the ITC, imports of the impacted products from China fell to approximately $265 billion in 2021, down from $311 billion in 2017, prior to the introduction of the duties.
• The agency reported that in 2021, prices for imports from China in heavily affected industries like computer equipment, semiconductors, furniture, and audio and video equipment increased by as much as 25%.

The background: The Trump administration initiated tariffs under Section 301 of the Trade Act of 1974 in 2018, as a response to China's alleged intellectual property theft and forced technology transfers. These tariffs targeted a broad range of Chinese products, intending to pressure China into changing its trade practices, which the administration deemed unfair and detrimental to American businesses and innovation.

A trade war escalated between the U.S. and China, with both nations imposing retaliatory tariffs on each other's goods. It not only raised concerns about global economic growth but also had significant repercussions for businesses in both countries, affecting billions of dollars of imports.

The Biden administration has maintained the tariffs on Chinese imports for over two years and is conducting an effectiveness review to determine if they should continue.

Meanwhile, thousands of importers demand reimbursement in billions of dollars in U.S. court, arguing that the U.S. government failed to properly consider public input and neglected to evaluate the negative impact on the American economy before implementing tariffs that they say have ultimately pushed up their input costs.

Likely outcomes/Takeaway:

• The Biden administration sees the tariffs as an important tool for negotiating with Beijing and enhancing U.S. competitiveness. That being said, despite pressure from companies and high inflation rates, there is minimal evidence suggesting that the White House has any intention to lift the duties, as it’s considered a politically risky move.
• As the administration moves forward with the review process, the USTR spokesman said it will take into account findings from ITC and the impact of 301 tariffs on the U.S. economy.
• The court case with American importers is expected to go into a final ruling this year, with high chances that either party would appeal the decision to a higher federal court, the South China Morning Post reported.

Quotables:

• “It’s hardly news that tariffs are a tax paid by American families and companies, or that tariffs produce some winners and many losers across the U.S. economy,” said John Murphy, Senior Vice President for International Policy at the U.S. Chamber of Commerce
• “Did you take into account any of these comments? Did you come to some sort of modicum of independent judgment that these tariffs were appropriate in light of the devastating economic harms predicted by the largest industry organizations and consumer organizations in the United States?” a lawyer for the plaintiffs
• "The China tariffs are, in my view, a significant piece of leverage - and a trade negotiator never walks away from leverage," U.S. Trade Representative Katherine Tai

Good Reads:

US Importers Bore Cost of Trump’s China Goods Tariffs, ITC Says (Bloomberg)

US importers demand refund of Trump-era tariffs on Chinese goods worth billions of dollars (SCMP)

USTR Tai calls U.S. tariffs on Chinese goods 'significant' leverage (Reuters)