Biden administration imposes steep tariffs on Chinese imports, targeting EVs, solar panels, and shipbuilding sectors. Learn about the impact on US-China trade relations.
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In a significant move on Tuesday, the Joe Biden administration imposed punitive tariffs on a range of Chinese-made products, including electric vehicles (EVs), solar photovoltaic panels, EV batteries, steel, aluminum, and medical equipment.
This decision follows a four-year review under Section 301 of the US Trade Act of 1974, during which the tariff on EVs imported from China rose sharply from 27.5 percent to 102.5 percent.
Background of Section 301
Section 301 is a tool the US administration uses to take “corrective” action against trade practices it deems unfair or those violating international trade rules.
However, there are growing concerns that the United States is wielding Section 301 to curb the development of China’s industries.
Following these tariffs, China must prepare for another round of investigations under Section 301 targeting its maritime trade, logistics, and shipbuilding sectors.
These investigations were initiated in April in response to a petition filed by five leading US national labor unions on March 12.
Historical Context of Shipbuilding
The US was once the world’s largest shipbuilding nation during World War II and maintained this status until the 1970s.
However, Japan’s rapid resurgence in the 1980s and the rise of the Republic of Korea (ROK) in the late 1990s led to a decline in the US shipbuilding industry.
In contrast, China’s shipbuilding industry began its ascent in the 2010s.
By the end of last year, China accounted for 50.2 percent of all merchant tonnage produced globally, while the US accounted for less than 1 percent.
Global Shipbuilding Leadership
| Country | Global Share (%) | Gross Registered Tons (millions) |
|---|---|---|
| China | 50.2 | 42.32 |
| Republic of Korea | Second place | N/A |
| Japan | Third place | N/A |
| United States | <1 | 0.6 |
This shift in shipbuilding leadership reflects broader economic trends and is unrelated to China’s trade policies.
Focus on New Industries
While the US shipbuilding industry has declined, the country has focused on developing new industries such as information and communications technology, big data, artificial intelligence, supercomputing, and biotechnology.
Similarly, China’s shoe and apparel manufacturing dominance has waned over the past decade.
US Labor Unions and Section 301
US labor unions have the right to voice their concerns about the decline of the US shipbuilding industry.
However, rather than addressing the real reasons behind this decline, the US Trade Representative (USTR) is using Section 301 to target China’s industries.
The US Trade Act of 1974 is a US law with no jurisdiction in other countries.
Hence, both the US and China, as members of the World Trade Organization (WTO), should refer their trade disputes to the WTO dispute settlement mechanism.
WTO and Trade Disputes
Clause 23 of the WTO dispute settlement rules states that no member has the right to declare that another member has violated a rule—only the WTO dispute settlement mechanism can do that.
Members can submit complaints to the mechanism for redressal.
In August 2018, China lodged a complaint with the WTO against the US for imposing extra tariffs on Chinese imports based on a Section 301 investigation.
In September 2020, the WTO ruled that the US tariffs violated WTO rules and were thus illegal.
Future Prospects
China recently filed a formal complaint against the US Inflation Reduction Act, claiming that US subsidy policies discriminate against foreign automakers and undermine global efforts to adopt EVs.
It is hoped that the US will adopt a more collaborative approach and allow the WTO’s dispute settlement mechanism to address the Chinese shipbuilding issue.
Through consultation, both sides can work towards an amicable resolution.
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