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Industry Reacts to Biden Administration’s China Trade Update

Katherine Tai finally outlined what she called “the starting point of our administration’s strategic vision” for China trade policy Monday in a speech that the NRF described as “lackluster.”

Speaking at an event hosted by the Center for Strategic & International Studies, the United States Trade Representative (USTR) confirmed much of what The Wall Street Journal and others had attributed to unnamed sources weeks ago: the Biden administration plans to largely maintain the tariffs imposed by its predecessor, reopen the tariff exclusion process and formally begin a fresh round of talks with China.

“Above all else, we must defend—to the hilt—our economic interests,” Tai said. “That means taking all steps necessary to protect ourselves against the waves of damage inflicted over the years through unfair competition. We need to be prepared to deploy all tools and explore the development of new ones—including through collaboration with other economies and countries. And we must chart a new course to change the trajectory of our bilateral trade dynamic.”

Though she didn’t offer a precise timeline, Tai said she intends to begin “frank conversations” with her counterpart in China “in the coming days.” These discussions will cover both China’s halting performance under the Phase One agreement—according to Chad Brown of the Peterson Institute for International Economics, it hit less than 60 percent of its purchase commitment last year and was tracking at less than 70 percent this year in August—and the country’s “state-centered and non-market trade practices.” Though the USTR didn’t explicitly tie China’s subsidy policies to potential new tariffs, she said the administration “will use the full range of tools [it has] and develop new tools as needed.”

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“The reality is [the Phase One] agreement did not meaningfully address the fundamental concerns that we have with China’s trade practices and their harmful impacts on the U.S. economy,” Tai said. “Even with the Phase One agreement in place, China’s government continues to pour billions of dollars into targeted industries, and continues to shape its economy to the will of the state, hurting the interests of workers here in the US and around the world.”

Tai did not offer many details on how and when the administration would reopen the tariff exclusion process, except to say that it would place “a lot of weight” in what it hears from businesses—particularly small and medium-sized businesses “that certainly have been impacted by the tariffs.”

“We will ensure that the existing enforcement structure optimally serves our economic interests,” Tai said. “We will keep open the potential for additional exclusion processes as warranted.”

Finally—and “critically,” Tai said—the U.S. will “work with allies to shape the rules for fair trade in the 21st century, and facilitate a race to the top for market economies and democracies.”

The National Council of Textile Organizations (NCTO), a D.C.-based trade association representing domestic textile manufacturers, voiced support for the new policy framework shortly after Tai’s speech.

“China’s rampant abuse of intellectual property rights and other illegal trade activity has gone on for far too long at the direct expense of U.S. manufacturers and the loss of millions of U.S. manufacturing jobs,” NCTO president and CEO Kim Glas said in a statement. “The U.S. textile industry supports the president’s authority to use Section 301 to address China’s unfettered practice of intellectual property theft, which has had a damaging impact on the entire U.S. textile and apparel production chain and other manufacturing industries for decades.”

Tai’s speech proved less popular with other trade organizations that have long lobbied for an end to the tariffs first imposed by former President Donald Trump. Austen Jensen, senior vice president of government affairs at the Retail Industry Leaders Association, implored the administration to pursue a trade strategy “that better aligns with our nation’s goals and objectives without punishing American retailers and consumers with higher taxes.”

“As retailers navigate the challenges of global supply chains made more complex by the ongoing pandemic, it’s critical that the tools used in our trade relationships be effective, precise and intentional,” Jensen said in a statement. “[Section] 301 tariffs have cost consumers more than $350 billion since 2018 and have yielded little strategic benefits. Retailers urge Ambassador Tai and the Biden-Harris administration to work towards eliminating existing tariffs as they move to realign our trade relationship with China.”

Steve Lamar, president and CEO of the American Apparel & Footwear Association, also expressed concern with the Biden administration’s plans to continue collecting tariffs.

“At a time when industry is struggling with an unprecedented supply chain crisis due to our crumbling infrastructure, economic fallout from a damaging pandemic, and unprecedented freight costs, it is distressing that the administration has chosen to continue to subject U.S. companies to these damaging taxes,” Lamar said. “Although restarting an exclusion process is an important step forward, the far better course would have been to discontinue use of these tariffs entirely.”

Though the United States Fashion Industry Association (USFIA) has been no fan of the tariffs—or Biden’s slow movement on trade—it said it was “pleased” the administration had concluded its review of China policy.

“As USTR analyzes the impact of the China 301 tariffs on the economy, we believe it is very clear that it is time to remove those tariffs on consumer products such as those on List 3 and List 4A,” a USFIA spokesperson said. “Not only have those tariffs increased costs to American families and consumers, but they have not met the standard of providing strategic benefits. We look forward to working with the Administration to achieve that goal.”

The National Retail Federation’s David French said the administration’s “lackluster” announcement “will further inflict unnecessary damage to the American economy and retail supply chains.”

“The continuation of these harmful tariffs worsens the challenges thousands of retailers must navigate, especially at a time when many are only beginning to emerge from the serious economic damage they have suffered as a result of the global pandemic,” the senior vice president of government relations said. “Because these tariffs touch products in nearly every sector of the U.S. economy, they also ultimately force consumers to pay higher prices.”

French, however, seemed to welcome the prospect of renewed trade talks. “It is critical the administration initiate immediate discussions with China so we can level the international playing field and bring an end to the global supply chain disruption,” he said.

Though Biden’s approach offers less of a departure from Trump’s than many had hoped, Tai attempted to differentiate the two. The current administration, she stressed, would not aim to “inflame” trade tensions with China and would work multilaterally with its allies abroad. The president’s as-yet-unpassed infrastructure bill and Build Back Better plan, she also claimed, will allow the U.S. to “engage from a position of strength.”

“China and other countries have been investing in their infrastructure for decades,” Tai said. “If we are going to compete in the global market, we need to make equal or greater investments here at home. That continuous investment ensures we can maintain our competitive edge throughout the 21st century.”

Additional reporting by Jessica Binns.