China 2025

Dishwashers to Nuclear Reactors: The US Retaliation List for Section 301 is Released

While this tariff discussion is going on inside Washington, of course, at least four additional things should also be taking place. First, the tariff list is only part of the Section 301 case.  Also coming in the next 60 days is more detail on what the proposed “parallel” regime to more tightly screen Chinese investment will look like.  This system is meant to run at the same time as the broader CIFUS process.  So far, officials are unclear about Treasury intends to do to manage this new set of procedures. Second, the US is simultaneously moving ahead with a case against China at the World Trade Organization (WTO).  Third, negotiations between the US and China should be ramping up.  Since the clock is ticking on the imposition of tariffs, with only 30 days before they are meant to take effect, there is extremely limited time to get to an agreement.  Given the sweeping nature of US complaints and the unclear goalposts that China needs to meet to head off sanctions, it is not obvious that 301 retaliation can be stopped. Finally, the Chinese are likely to put out their own list of counter-retaliation measures.  They just published a list of 128 items subject to $3 billion in sanctions as part of their own response to US steel and aluminum tariffs.  These included new barriers to US exports of wine, fruits and nuts.  But these are likely to look like minor issues compared to what China has in store for the Americans in the wake of the $50 billion in tariff hikes under the Section 301 dispute. In short, the publication of the tariff list today heralds the start of a new era in US-China relations and the beginning of a totally different American trade policy.  Firms should be braced for some very rough times ahead.