Prof. ST Hsieh
Director, US-China Energy Industry Forum
July 25, 2023
There is no doubt that any war has some unintended consequences, and everyone pays a price. Trump’s tariff war started in 2018 against China aimed at balancing the trade imbalances was controversial. It already has one significant impact: it destabilized the US-China relation.
Many people had expectations that President Biden would modify the tariff strategy. But after two and half years in office, Biden has made no moves on tariff, so US-China relation is still stuck at the bottom. It appears that now “A group of retail and product trade associations” is taking legal actions against the US government. However, even US legal system is relatively independent from political influences, it takes time and money. There is no expectation of when the court will make any decision soon.
The next US general election is less than 18 months away. Wise politicians can score points by taking clear positions on the tariff. Given the fact that China bashing is popular in the US election politics, politicians are habitually taking hardlines. But the tariff war is a failure in the sense that most of the burdens are shared among the US consumers rather than the Chinese. Any softening of the tariff war can kill the two birds by one stone. One of the birds is the taming of inflation in the US and the other bird is stabilizing the US-China relation. Think about it!
‘Erroneous’ China Tariff Ruling Called into Question
Tue, July 25, 2023 at 10:57 AM PDT
A group of retail and product trade associations led by the Retail Litigation Center filed an amicus brief this week in the United States Federal Court of Appeals for the Federal Circuit, urging the court to reverse the U.S. Court of International Trade (CIT) judgment in the China 301 tariff case.
The National Retail Federation, the American Apparel & Footwear Association, the Consumer Technology Association, Footwear Distributors and Retailers of America and the Juvenile Products Manufacturers Association collectively signed onto the brief, which called the CIT’s reasoning in its latest decision in the China Section 301 tariff litigation “erroneous” and said it “must be reversed.”
The tariffs enacted in 2018 by the Trump administration placed duties ranging from 7.5 percent to 25 percent on hundreds of billions of dollars’ worth of imported goods from China. In September 2022, the U.S. Trade Representative (USTR) held a customary four-year review, saying it would keep the tariffs in place.
Earlier that year in April, the CIT found that the enactment of these duties did not violate the Trade Act, but the USTR failed to follow the Administrative Procedure Act (APA) requirement to consider public comments when it imposed the tariffs.
“Initially the CIT correctly ruled that USTR failed to meet its statutory and fundamental duties under the APA when they raced forward to impose these tariffs without responding to a single comment from American consumers and business,” the amicus brief stated.
After around 3,600 importers challenged the legality of Section 301 tariffs at the CIT, a three-judge panel issued an opinion in March upholding the USTR’s imposition of the third and fourth round of tariffs enacted in 2018 and 2019.
“The CIT erred when it failed to vacate the illegally imposed tariffs and instead gave USTR a second chance to meet its legal obligations,” the brief stated. “On remand once again, the agency failed to meet the core requirements of the APA. Instead of addressing the magnitude of legitimate concerns raised over imposition of tariffs on virtually all imports from China, USTR switched gears and basically argued, ‘the President made us do it.’ Shockingly, the CIT accepted this novel excuse.”
So far, the Biden administration has made no moves to change the tariffs. Critics of the tariffs argue that rather than punishing China, the duties unfairly impact U.S. companies, contributing to inflation and continued higher costs of goods for consumers. Tariffs have become one of many factors driving some companies to pursue re-shoring or near-shoring some of their production to the U.S. or neighboring areas such as Mexico and Latin America.
In June, the Economy, Politics and Social Research Center at the Universities of Bonn and Mannheim reported that American importers shouldered 93 percent of U.S. tariffs, while Chinese importers bore just 68 percent of China’s tariffs. The researchers concluded that U.S. exporters covered the remaining 32 percent.
“Such a near-complete ‘pass-through’ is uncommon and astonishing given the power of the United States to influence terms of trade,” Lei Li, assistant professor of applied microeconomics at the University of Mannheim and one of the paper’s three authors, said in a statement at the time.
The brief filed by the Retail Litigation Center calls for the U.S. Court of Appeals for the Federal Circuit to vacate the List 3 and List 4A tariffs, which cover nearly 10,000 products. List 3 goods—food, beverages, chemicals, wood and fabrics—are subject to a 25 percent duty. List 4A goods, which include clothing, electronics, sports equipment and other items, are subject to a 7.5 percent tariff.
“The APA demands that USTR justify the imposition of List 3 and 4A tariffs,” the brief said. “The agency has been given multiple chances to do so and they continue to ignore all comments, concerns and alternative options. This blatant disregard for the law cannot continue to go unchecked. It’s beyond time to impose the normal remedy for unlawful agency action and vacate the tariffs which are taxing American consumers and businesses, contributing to persistent inflation and burdening our supply chains.”