Most Say Sections 301 and 232 Tariffs Hurting America, but ITC Hears From Defenders, Too

Other companies said Section 232 or Section 301 tariffs have been helpful but not enough to really gain ground lost to China's cheap imports. The Forging Industry Association said its members report their prices are usually 30% to 50% above the China price, and 84% said they lost business to lower-priced foreign competition in the past two years. FIA told the International Trade Commission that the tariff on imported Chinese forgings needs to be 50% to protect domestic industry.

Century Aluminum, one of the few U.S. companies that had asked for Section 232 tariffs, said it has idled one of its three smelters because of the cost of energy. "The U.S. primary aluminum industry is only limping along and remains highly vulnerable," it said, so the 10% tariff on imported aluminum needs to stay.

More than 100 comments, some following up on testimony at three days of hearings (see 2207210015), came in to the International Trade Commission as it attempts to evaluate the efficacy of the tariffs and their impact on the U.S. economy. The investigation number is Inv. No. 332-591; in order to read the comments, you must create a profile at the ITC's Electronic Document Information System. The report was ordered by Congress but has no official weight in changing the course of the tariff policy.

Separately, the Office of the U.S. Trade Representative solicited comments on why the Section 301 tariffs are benefiting businesses, but it has declined to make any of those comments public.

The last of the ITC comments were published Aug. 25.

Most of the comments discussed how the tariffs have affected the businesses in the trade group or came from a specific business, but some also made suggestions about how policy should change. Many firms would like a reopened Section 301 exclusion process, both for products that once had exclusions that have since expired, and for new applicants.

The Motor Equipment Manufacturers Association said its members "found the exclusions process to be capricious and difficult to navigate. A new, fair, and transparent exclusions process for the Sec. 301 tariffs is needed to provide tariff relief, especially for components and materials used in domestic manufacturing."

MEMA said its members will be suppliers on one-third of the Bipartisan Infrastructure Law's projects, and that with higher tariffs on electrical equipment components, it could exhaust infrastructure funding faster than planned.

Tesla also pointed to how the tariffs can undermine other priorities, such as fighting greenhouse gas emissions by electrifying transportation and increasing the adoption of solar panels.

Tesla wrote it has been working to create a domestic advanced battery supply chain, even back to nickel and lithium supplies and graphite processing. Tesla's domestically manufactured EV battery cell uses imported artificial graphite, cathode material and precursors, and those materials are taxed at 25%, significantly higher than the 7.5% Section 301 tariffs on Chinese battery packs.

The company said the cell was developed after the List 3 exclusion process closed, so that was not an option.

"The transition time in building end-to-end domestic and regional supply chains for clean energy manufacturing will take significant time and the current geographic constraints on the supply chain must be recognized," the company wrote.

The Tariff Reform Coalition, led by the National Foreign Trade Council, argued: "There is virtually no evidence that the Section 232 or 301 tariffs are having any effect on the problems they were intended to address. Rather, the burden of these tariffs is falling on US businesses and their customers who are being punished for problems they did not create and cannot solve."

The coalition said the four-year sunset review for Section 301 tariffs is opaque, with not only private comments from proponents of continuation, but also no disclosure of USTR's timetable for making any decision.

The Consumer Technology Association said the sunset review is a sign that Congress "recognized that if Section 301 actions were going to achieve their objectives, we should generally know by now." CTA says they have not, and said Section 337 proceedings against intellectual property infringement are "far more effective against discriminatory Chinese trade practices, and less costly to the economy writ large, than imposing indiscriminate broad-based tariffs on the vast majority of U.S.-China trade."

CTA also said new exclusions would be pointless, as would a narrowing of the target list. "Such approaches, and others like them, will only continue to perpetuate the arbitrariness of the tariffs," the trade group wrote.

A number of trade groups and companies said it's too hard to find alternative suppliers outside China for the goods they import, or they can only find enough volume to cover part of their needs. Some said that's because even with the tariffs, Chinese goods remain cheaper than those from other countries; other commenters said other countries don't have the skills and machinery needed to make their products; others said other countries' manufacturers are being driven out of business because China can sell just as good products for cheaper.

The Holiday Ornament Holiday Occasion (“HoHo”) Coalition said many of its firms looked to Vietnam to make Christmas decor. "In the end, many of our individual companies discovered that the costs and logistical complications of establishing a presence outside of China were more severe than the added cost of the tariffs," HoHo said.

Some trade groups said the actions hurt them both in importing and exporting. The American Feed Industry Association said its exports face retaliatory tariffs in China, but it has to pay 25% tariffs on vitamins and nutrients that are inputs into animal feed that only come from China.

The role the tariffs play in the highest inflation in 40 years was disputed.

U.S. Steel, which benefits from 25% tariffs on imported steel, said steel prices have dropped about 50% since September, and the tariffs cover only about a third of steel imports at this point, so they have no meaningful impact on inflation.

The Association of Home Appliance Manufacturers said a white paper put out by a number of trade associations found Section 301 tariffs are causing either higher prices of components from outside China or a supply shortage; many companies are chasing the same pool of Chinese supplier alternatives. It said that a survey of its members said that 85% say Section 301 tariffs affect their ability to fill orders; and 38% said they make it harder to maintain headcount.

In addition to asking for exclusions to reopen broadly, some trade groups or firms asked for smaller fixes. The Coalition for Tariff Reform complained that metal imports covered by Section 232 exclusions apply to quotas until they are filled. "This requirement greatly limits the utility of the duty exclusion and should be terminated," the group said.

The Society of Chemical Manufacturers & Affiliates asked that USMCA implementing legislation be edited to allow duty drawback for Section 301 tariffs. "The collection of these levies places SOCMA members at a severe disadvantage for exports to Mexico and Canada since international competitors do not have the 25% surcharge included in the cost of raw materials," the group said.

The Aluminum Extruders Council said that while Section 232 tariffs on aluminum helped at first, when a general exclusion was put in for extrusions, it doubly hurt domestic firms. "Our foreign competitors can compete with us for domestic customers without having to pay the Aluminum 232 tariffs, while also not being subject to any Aluminum 232 on their raw material billets," the group said, so it is asking for that general exclusion to be withdrawn.