Trump Threats Turn to Action

On January 22, President Trump turned his threats to impose higher tariffs on China and promises to protect U.S. industry from imports into action. He ordered safeguard tariffs on imported large residential washing machines and imported solar cells and modules to protect U.S. industries. This post reviews the new tariffs and previews pending trade cases, which will provide opportunities for more presidential action.

The President’s safeguard actions were based on global safeguard investigations by the U.S. International Trade Commission (ITC) under Section 201 of the Trade Act of 1974. The ITC found that increased imports of solar cells and large residential washing machines are a substantial cause of serious injury to domestic manufacturers. It recommended the imposition of global safeguard tariffs on imports of residential washers. Most of the ITC commissioners supported an increase in tariffs on solar imports, with a carve-out for a specified quantity of imported cells. This is the first use of Section 201 authority since 2002.

For imports of large residential washers, the President imposed a safeguard tariff-rate quota (TRQ) for three years. The first 1.2 million units of imported finished washers will face an initial tariff of 20%, which will decline to 18% in the second year and to 16% in the third year. A much higher 50% tariff will be applied to all imports of finished washers above the quota and on covered parts. Those tariffs decline slightly over the next two years, first to 45% and then to 40%. Initially 50,000 units of covered parts will be excluded from the tariff; the exclusions increase by 20,000 units in each of the following two years to 70,000 units in the second year and 90,000 units in the final year.

The President set lower safeguard tariffs for imports of solar cells and modules for a four-year period. The tariff begins at 30% in the first year, and drops by five percentage points in each of the following three years, ending at 15% in the fourth year. In addition, the first 2.5 gigawatts of imported solar cells will be exempt from the tariff in each of the four years.

China’s role in the increased imports figured prominently in the U.S. Trade Representative’s (USTR) presentation of the President’s decisions.

Next up for presidential action are the investigations on whether imports of steel and aluminum are threatening national security. The Commerce Department has completed its steel and aluminum investigations under Section 232 of the Trade Expansion Act of 1962, as amended, and submitted its reports to the President earlier in the month. The President has 90 days to decide whether to take action, and if so, what action to take. The potential remedies include tariffs and quotas.

Also pending is USTR’s investigation of China’s intellectual property practices under Section 301 of the Trade Act of 1974. On August 28, at the President’s behest, the USTR initiated an investigation of China’s technology transfer, intellectual property and innovation practices. If USTR finds that they are unreasonable or discriminatory and burden or restrict U.S. commerce, the President could take a variety of actions, including increasing tariffs.

Jean Heilman Grier

January 23, 2018

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