USTR Implements Sweeping Tariff Increases on Chinese Goods, Tightens Trade Enforcement to Protect U.S. Industries

At a Glance

• The U.S. Trade Representative announced significant tariff increases on electric vehicles, semiconductors, solar cells and key medical goods to counter China’s trade practices and support U.S. industries.
• New exclusions for certain machinery and regulatory actions on de minimis entries aim to prevent tariff circumvention and bolster domestic manufacturing.
• While some industry groups support the tariffs as essential for strengthening domestic production, others criticize the economic impact and question their effectiveness in changing China’s behavior.

On September 13, 2024, following a statutory four-year review of tariff actions taken by the U.S. Trade Representative (USTR) pursuant to its Section 301 investigation of China, the USTR announced a series of final modifications to the Section 301 tariffs on Chinese goods, aiming to address China’s trade practices related to technology transfer, intellectual property and innovation. These modifications include new and increased tariffs on electric vehicles, lithium-ion EV batteries, photovoltaic solar cells, semiconductors and various medical goods.

The USTR doubled the tariffs on certain medical goods, such as syringes, from 50% to 100%, reflecting a strategy to encourage domestic production and reduce dependency on Chinese imports. Additional increases were applied to medical gloves and face masks, with tariffs on gloves set to reach 100% by 2026. The adjustments aim to support U.S. preparedness and supply-chain diversification away from China.

Below is a list of products that will receive modified tariffs based on the recent actions by the USTR:

• Electric Vehicles (EVs): Tariffs will increase to 100% in 2024.
• Lithium-Ion EV Batteries: Tariffs will increase to 25% in 2024.
• Photovoltaic Solar Cells: Tariffs will increase to 50%.
• Semiconductors: A 50% tariff on semiconductors made in China will take effect in 2025.
• Medical Gloves: Tariffs will rise to 50% in 2025 and 100% in 2026.
• Disposable Textile Face Masks: Tariffs will increase to 25% in 2025 and 50% in 2026.
• Syringes (Excluding Enteral Syringes): Tariffs on syringes will double from 50% to 100%.
• Needles: Tariffs will increase, similar to syringes, reflecting the doubling to 100%.
• Tungsten Products: Proposed tariff increases up to 25% on tungsten.
• Polysilicon and Wafers: A proposed 50% tariff for these materials used in solar cells and semiconductors.
• Ship-to-Shore Cranes: A 25% tariff will apply, with an exclusion for cranes ordered before May 14, 2024.
• Certain Medical Goods: Tariffs on surgical gloves and other critical personal protective equipment (PPE) are set to escalate in stages to protect domestic investments.
• Solar Manufacturing Equipment: Some equipment will continue to receive temporary exclusions, while other categories are removed from the exclusion list due to the availability of alternative sources.
• Machinery for Domestic Manufacturing: The USTR has proposed an expanded exclusions process for certain machinery, adding several subheadings eligible for temporary exclusions while removing some, based on stakeholder feedback.

In response to public comments, the USTR implemented several exclusions, including an exemption for enteral syringes and a temporary exclusion for certain industrial machines used in domestic manufacturing. The exclusion process was expanded to include additional machinery tariff lines, though some exclusions for solar manufacturing equipment were removed. The administration emphasized the availability of alternative sources for these goods in the U.S. and Europe, reflecting a broader push to bolster domestic manufacturing capabilities.

The administration highlighted that increased tariffs on key goods, including tungsten, polysilicon and wafers, are designed to counter China’s dominance in critical supply chains such as solar cells and semiconductors. The tariffs aim to protect recent U.S. investments and encourage diversification away from Chinese sources, enhancing supply chain resilience.

In parallel with the tariff increases, the Biden administration is pursuing regulatory changes to limit the de minimis entry system, which currently allows goods valued under $800 to enter the U.S. duty-free. New rules will exclude goods subject to trade enforcement actions from de minimis treatment and introduce stricter information requirements for these imports. The changes aim to prevent circumvention of tariffs and enhance enforcement of U.S. trade laws.

The administration justifies these actions as necessary to protect U.S. industries and workers from China’s unfair trade practices. Economic analyses referenced in the USTR reports suggest that the tariffs have supported U.S. production in targeted sectors and helped diversify supply chains. However, the broader economic impact, including negative effects from Chinese retaliatory tariffs, remains a concern, highlighting the complexities of the ongoing trade conflict.

The USTR received extensive feedback from stakeholders, with mixed responses. While some industry groups, like the Coalition for a Prosperous America, support the tariffs as a critical tool for reshoring and strengthening domestic production, others, including the U.S.-China Business Council, criticized the continued and increased tariffs as detrimental to American competitiveness and consumer prices. There is also ongoing debate about the effectiveness of tariffs in changing China’s trade practices, with some arguing that additional measures, such as ending China’s most-favored-nation status, are necessary.

Looking ahead, the administration plans further regulatory actions to tighten trade enforcement and is urging Congress to pass complementary legislation to reform the de minimis entry system. These efforts reflect a broader strategy to fortify U.S. trade policy and reduce vulnerabilities in critical supply chains. However, legislative progress remains uncertain due to political dynamics, and the administration may continue to rely on executive actions to advance its trade agenda.

The USTR announced that public comments on the proposed modifications to the Section 301 tariffs are open from September 23, 2024, to October 22, 2024.