Biden administration announces tariffs on Chinese imports

On May 14, President Joe Biden directed the Office of the U.S. Trade Representative (USTR) to add or increase tariffs on $18 billion in Chinese imports under Section 301 of the Trade Act of 1974, saying China’s unfair trade practices concerning technology transfer, intellectual property and innovation threaten American businesses and workers and flood global markets with artificially low-priced exports.

The action follows the release of a USTR report titled “Four-Year Review of Actions Taken in the Section 301 Investigation: China’s Acts, Policies and Practices Related To Technology Transfer, Intellectual Property And Innovation.”

The administration says China’s government has used “unfair, nonmarket practices” for too long, creating unacceptable risks to America’s supply chains and economic security.

The administration says the action is targeted at strategic sectors in which the U.S. is making historic investments, such as steel and aluminum, semiconductors, electric vehicles (EVs), batteries, critical minerals, solar cells, ship-to-shore cranes and medical products.

According to a member brief from the Recycled Materials Association (ReMA), Washington, the USTR has recommended establishing a new exclusions process that focuses on machinery products used in domestic manufacturing. However, the administration has not announced the status of the tariff exclusions that cover certain products, such as shredder products, in advance of their May 31 expiration.

"One key recommendation resulting from the review is the establishment of a new product exclusions process that will focus exclusively on machinery equipment used in domestic manufacturing," ReMA says. "USTR has announced that it will only consider tariff lines that fall under Chapters 84 and 85 of the Harmonized Tariff Schedule of the U.S. (HTSUS), and most shredder wear parts are imported under 8479.90.95, so these parts would qualify as eligible products to seek relief from the updated Section 301 action.”

In February, ReMA (then known as the Institute of Scrap Recycling Industries) submitted comments to the USTR in which it noted that foundries that produced most shredder wear parts left the U.S. primarily for China in the last 20 years and that earlier Section 301 tariff actions did not result in reshoring manufacturing of these components.

ReMA says USTR is expected to release a notice in the Federal Register next week presenting the full schedule for implementing these modifications and potentially more details about the updated exclusions process.

The recently announced Section 301 tariffs targeted by sector are:

Steel and Aluminum

The tariff rate on certain steel and aluminum products under Section 301 will increase from zero to 7.5 percent to 25 percent in 2024.

“Steel is a vital sector for the American economy, and American companies are leading the future of clean steel," according to a May 14 White House fact sheet on the tariffs.

The administration says American workers continue to face unfair competition from China’s nonmarket overcapacity in steel and aluminum, which is among the world’s most carbon-intensive.

“China’s policies and subsidies for their domestic steel and aluminum industries mean high-quality, low-emissions U.S. products are undercut by artificially low-priced Chinese alternatives produced with higher emissions," the administration adds. "Today’s actions will shield the U.S. steel and aluminum industries from China’s unfair trade practices."

Semiconductors

The tariff rate on semiconductors will increase from 25 percent to 50 percent by 2025.

In the next three to five years, China is expected to account for almost half of all new capacity coming online to manufacture certain legacy semiconductor wafers, the administration says.

But, through the CHIPS and Science Act, President Biden is making a nearly $53 billion investment in American semiconductor manufacturing capacity, research, innovation and workforce to help counteract decades of disinvestment and offshoring. Raising the tariff rate on semiconductors is an important initial step to promote the sustainability of these investments, the administration says.

EVs

The tariff rate on EVs under Section 301 will increase from 25 percent to 100 percent this year in response to China’s exports of EVs growing by 70 percent from 2022 to 2023.

As part of the president’s Investing in America agenda, the administration is incentivizing the development of a domestic EV market through business tax credits for manufacturing batteries and producing critical minerals, consumer tax credits for EV adoption, standards, federal investments in EV charging infrastructure and grants to supply EV and battery manufacturing. The increase in the tariff rate on EVs will protect these investments and jobs from unfairly priced Chinese imports, the administration adds.

Batteries, Battery Components and Parts and Critical Minerals

The tariff rate on lithium-ion EV batteries and battery parts will increase from 7.5 percent to 25 percent this year, while the tariff rate on lithium-ion non-EV batteries will increase from 7.5 percent to 25 percent in 2026.
 
The tariff rate on natural graphite and permanent magnets will increase from zero to 25 percent in 2026, while the tariff rate for certain other critical minerals will increase from zero to 25 percent this year.

The administration notes that China controls more than 80 percent of certain segments of the EV battery supply chain, particularly upstream nodes such as critical minerals mining, processing and refining.

"The concentration of critical minerals mining and refining capacity in China leaves our supply chains vulnerable and our national security and clean energy goals at risk," the White House adds, though through the Bipartisan Infrastructure Law, the Defense Production Act and the Inflation Reduction Act, the Biden-Harris Administration has invested nearly $20 billion in grants and loans to expand domestic production capacity of advanced batteries and battery materials.

The Inflation Reduction Act also contains manufacturing tax credits to incentivize investment in battery and battery material production in the U.S. and the American Battery Materials Initiative is designed to mobilize an all-of-government approach to securing the supply chain for batteries and their inputs.

Additional tariffs

The tariff rate on solar cells (whether or not assembled into modules) will increase from 25 percent to 50 percent this year, while the rates on ship-to-shore cranes will increase from zero to 25 percent and syringes and needles from zero percent to 50 percent. For certain personal protective equipment, including certain respirators and face masks, the tariff rates will increase from zero to 7.5 percent to 25 percent this year, while those on rubber medical and surgical gloves will increase from 7.5 percent to 25 percent in 2026.