10 Things to Know about Biden’s Import Tax Increases

The Biden administration today announced plans to extend existing Section 301 taxes on imports from China and to impose additional taxes on goods ranging from electric vehicles (EVs) to medical supplies. 

The taxes follow a “Review of Necessity” by the Office of the U.S. Trade Representative (USTR) of Section 301 tariffs imposed during the Trump administration. Specifically, U.S. law required the Biden administration to review the effectiveness of existing Section 301 tariffs in achieving their objectives, possible alternative actions, and the effects of tariffs and alternatives on the U.S. economy.

Following its review, the Biden administration announced it will maintain existing tariffs and add new ones. 

Here are 10 things to know about the tariffs:

1. The tariffs break Biden’s promise not to increase taxes on Americans earning less than $400,000. They will increase the cost of products ranging from facemasks to goods made with steel, aluminum, or semiconductors. Existing Section 301 tariffs have cost the equivalent of $1,700 per household. At a time when Americans are concerned about high prices, the Biden administration has decided to make things even worse. 

Figure 1: New Section 301 “China” Import Taxes

2. The Review of Necessity that led to this action required USTR to review the effectiveness of existing Section 301 tariffs, including whether China has agreed to eliminate or phase out the unfair acts, policies, or practices targeted by the tariffs. The answer is a resounding “no.” According to the USTR review: “China Persists in Technology Transfer-Related Acts, Policies, and Practices … Industrial Planning and Targeting Continues to Motivate Technology Transfer … Cyber-Enabled Theft Has Continued Unabated … Chinese State-Owned Enterprise Attempts to Steal U.S. Telecommunications … Foreign Ownership Restrictions Persist in Multiple Sectors … … China Forces Joint Ventures Through Indirect Pressure … Opaque Administrative Reviews Continue to Facilitate Technology Transfer … China Continues to Drive Outward Investment Toward Advanced Technology … Industry Surveys Affirm the Continued Prevalence of Technology Transfer in China.” It is ludicrous and legally questionable for the administration to double down on this failure by imposing even more tariffs. 

3. Under U.S. trade law, Section 301 tariffs “shall be devised so as to affect goods or services of the foreign country in an amount that is equivalent in value to the burden or restriction being imposed by that country on United States commerce.” Nowhere in the USTR report is there any explanation of how the Biden administration calculated the cost of Chinese actions or the new U.S. tariffs. 

4. USTR received 1,498 public comments during its review of Section 301 tariffs. Not a single public comment from the U.S. automobile industry asked for new tariffs on Chinese EVs and parts. This includes Ford, General Motors, Stellantis, and the United Auto Workers union. 

5. The Biden administration’s interpretation of Inflation Reduction Act EV subsidies allows someone who leases an EV containing Chinese-made batteries and components to receive a subsidy of up to $7,500. Following the implementation of these tariffs, the United States will simultaneously subsidize AND tax Chinese EV batteries and components. 

6. In 2023, the United States imported 12,401 EVs from China, accounting for about 1 percent of U.S. EV sales. The Biden administration’s decision to impose preemptive tariffs brings to mind the Tom Cruise movie “Minority Report,” where a pre-crime unit arrests people before they have committed a crime. Rather than establishing this precedent, the United States should improve countervailing duty laws that allow for the imposition of duties on imports subsidized by foreign governments. 

7. U.S. trade law required USTR to consider the impact of Section 301 tariffs on the American economy. According to the USTR report: “Studies estimate that the 2018-2019 U.S. tariff actions, in aggregate, have had small negative effects on U.S. aggregate economic welfare and real incomes in the short run, due largely to reduction in imports from and exports to China. In studies that estimate long-run impacts, those effects are estimated to continue in the long run.” The proper response to policies that reduce U.S. economic welfare is to replace them, not expand them. 

8. The imposition of new taxes on medical supplies is a reversal of general U.S. policy goals initiated during the Trump administration, which exempted many medical supplies from Section 301 tariffs: “In light of the rising spread and ongoing efforts to combat COVID–19, the U.S. Trade Representative has determined that maintaining or reimposing additional duties on certain products subject to the [Section 301] action no longer is appropriate and that the application of additional duties to these products could impact U.S. preparedness to address COVID–19.” Alternatives such as stockpiling medical supplies provide a better option than tariffs that increase their cost.  

9. Biden’s taxes will go into place without a single vote by Congress, the branch of government responsible for setting import duties and regulating international commerce. 

10. U.S. trade law required USTR to review other actions that could be taken to respond to China’s trade policies. However, USTR’s four-year review only proposes more tariffs. There is no mention of other alternatives that have been widely suggested, ranging from joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership to bringing new cases against China at the World Trade Organization. 

The Biden administration’s review confirms that the tariffs failed to achieve their objectives. There is no reason to expect that more tariffs will lead to a different result. Although Section 301 tariffs are often misleadingly called ‘China tariffs,’ they are in fact taxes on Americans who import goods from China. The Biden administration should not impose ineffective new import taxes on Americans at a time when the high cost of living is our number one concern.