Additional Tariffs
Importantly for importers, the Report includes USTR's proposal to add or increase Section 301 tariffs for certain strategic product categories such as battery parts, electric vehicles ("EVs"), semiconductors, steel and aluminum products, and personal protective equipment. A White House memorandum and accompanying Fact Sheet, published concurrently with the USTR's Report on May 14, 2024, provides the following list of products to be subject to tariff increases and corresponding schedules:
- Battery parts (non-lithium-ion batteries) – Increase from 7.5% to 25% in 2024;
- Electric vehicles – Increase from 25% to 100% in 2024;
- Lithium-ion EV batteries – Increase from 7.5% to 25% in 2024;
- Lithium-ion non-EV batteries – Increase from 7.5% to 25% in 2026;
- Natural graphite – Increase from 0% to 25% 2026;
- Other critical minerals – Increase from 0% to 25%t in 2024;
- Permanent magnets – Increase from 0% to 25% in 2026;
- Semiconductors – Increase from 25% to 50% in 2025;
- Ship to shore cranes – Increase from 0% to 25% in 2024;
- Solar cells – Increase from 25% to 50% in 2024; and
- Steel and aluminum products – Increase from 0-7.5% to 25% in 2024;
- Certain Personal Protective Equipment (including facemasks and certain) respirators – Increase from 0-7.5% to 25% in 2024;
- Rubber Medical Gloves – Increase from 7.5% to 25% in 2026;
- Syringes and Needles – Increase from 0% to 50% in 2024.
Current Tariffs and Exclusions
Additionally, the USTR has recommended that tariffs currently in place on a wide range of Chinese-origin goods should remain in place. Both the USTR's Report and White House memorandum contemplate the establishment of a process for interested parties to request exclusions from modified Section 301 tariffs on solar manufacturing equipment. However, neither the USTR's Report nor the White House memorandum provide guidance on whether current product exclusions set to expire on May 31, 2024, will be maintained.
For companies that have relied on tariff exclusions over the past few years, the expiration of these exclusions can have drastic impacts on their ability to source certain finished goods and manufacturing inputs from China and result in potentially significant decreases in sales and production. The addition and increase of Section 301 tariffs on select strategic products can also present significant challenges for companies that utilize Chinese supply chains in the production of these products. Companies that may be affected by the expiration of current product exclusions or proposed tariff modifications should monitor for announcements and updates from the USTR.
Report Findings
Pursuant to statutory requirements, the Report evaluates the effectiveness of the Section 301 tariffs in countering China's unfair acts, policies, and practices, addresses other actions that could be taken by the USTR, and examines the effects of the Section 301 tariffs on the U.S. economy. The findings detailed in the Report suggest that the Section 301 tariffs have largely helped counter adverse Chinese policies and influenced certain positive responses by China such as the development of the Foreign Investment Law aimed at preventing improper divulgence of trade secrets and transfer of technology by company administrators. The Report addressed the negative impacts the tariffs have had on U.S. businesses, employment rates, and consumers, but minimized the degree of impact on the U.S. economy as a whole and noted that some negative effects were also due in part to the imposition of retaliatory tariffs by China.
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