The US has rocked the boat on international trade again with its bold new move. The Trump Administration has initiated new investigations of the trade practices of its 16 largest trading partners (including both China and India).
This investigation is taking place under Section 301 of the 1974 Trade Act and could result in additional tariffs imposed on American imports from those same countries. According to US officials, this investigation is also intended to remedy “unfair trade practices” and excess production capacity in these key sectors of the economy.
The US’ announcement that it would move as early as summer 2018 to impose additional tariffs, in addition to new investigations, has increased fears of another round of global trade disputes.
A Powerful Trade Tool: Section 301
The actions being taken on the investigations will be conducted pursuant to section 301 of the Tariff and Trade Act of 1974. That statute is very potent; it gives authority to the US government to take action against foreign nations determined to be catching US companies by way of illegal practices and other means.
The US Trade Representative has the ability to place tariffs against countries if they are determined to be injuring US manufacturers through any kind of the following activities: subsidy programmes (state-sponsored), dumping goods into the US market at a cost of approximately 25% less than the normal price, or having an excessive trade surplus.
The US Trade Representative, Greer, indicated the investigation is directed toward economies with a lot of manufacturing capacity that appears to exceed the amount that is being sold in the particular country. In essence, this implies a country is producing more manufacturing goods than are necessary for consumption in the domestic market and may wind up flooding the international marketplace and consequently negatively impacting US manufacturers.
The 16 Countries Under Investigation
The probe takes aim at a range of economies throughout the continents of Asia, Europe, and North America. Some of these economies include:
- European Union
- China
- Mexico
- Vietnam
- Taiwan
- Thailand
- Japan
- India
- South Korea
- Switzerland
- Malaysia
- Indonesia
- Cambodia
- Bangladesh,
- Norway,
- Singapore
Interestingly absent from this list is Canada, the second biggest trading partner with the United States.
According to data from the US Census Bureau, several of the countries listed above have significant trade surpluses with the US, something US government officials cite as rationale for imposing tariffs.
Tariffs Could Arrive by Summer
Greer mentioned that the process is moving fairly rapidly. The public can submit comments regarding the inquiry until April 15, and the public hearing has been set for sometime around May 5.
If everything stays on track, the possibility exists for tariffs to be put into place sometime prior to July, as the temporary tariffs imposed this year will expire at that time.
The temporary tariffs imposed earlier occurred after the United States Supreme Court decided previous global tariffs that had been imposed under emergency conditions were unconstitutional.
As a means of pressuring trading partners, the administration imposed a temporary ten per cent duty for 150 days under another provision of the trade law.
This new inquiry may provide an opportunity to reinstate more stringent tariffs in a lawful manner.
Forced Labour Investigation Expands
The Additional Inquiry into Forced Labour is in conjunction with the Capacity to Trade probe, which is separate from and will examine all imports coming into the United States from over sixty different countries to evaluate whether the goods arriving in the US are made with forced labour.
The US has previously begun to restrict imports of goods from the Xinjiang Province of China, under the Uyghur Forced Labor Prevention Act, as signed by former President Biden.
US government officials allege that authorities in the Xinjiang Province are forcing ethnic Uyghur Muslims and other ethnic minorities to work in labour camps. This allegation is vehemently denied by the Chinese government.
If wrongdoing is discovered through this additional investigation into forced labour, then similar import restrictions that are in place for the Xinjiang Province could be placed on other countries.
A Strategy to Rebuild Tariff Pressure
“The investigations could be another tactic for the Trump Administration to apply pressure on other nations as part of their overall trade agreement strategy,” suggests the consensus among trade professionals.
After successfully prohibiting the imposition of tariffs through the judicial branch of government, the Trump administration has sought alternative methods of applying trade pressure to other countries to facilitate establishing new trade agreements.
According to Greer, tariffs will continue to be a cornerstone of the Trump administration’s economic policies.
“We will continue to reduce the trade deficit and support U.S. manufacturing in order to create jobs and strengthen the domestic economy,” Greer stated; “the president will use whatever means necessary to ensure there are no more damaging practices from foreign countries toward U.S. manufacturers.”
What Happens Next?
The results of the investigation can substantially affect international commerce.
Imposing tariffs may also influence industries, such as electronics, automobiles, textiles, and machinery. Ultimately, countries exporting goods to the U.S., such as India, China, and Vietnam, may incur additional expenses when importing their products into the United States.
At the present time the entire world will pay close attention to developments in the weeks ahead.
Will the investigation create another trade line, or will the countries return to the negotiating process? Only time will tell.
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