US - China Tariffs

Restrictions, sanctions, tariffs – the US administration is aggressively pursuing financial superiority and control over imports. The primary instrument used in imposing the new tariffs is the Trade Act of 1974 section 301, which deals with importer costs and strategic benefits. While there is a tariff on all imports from any country, the US government can and has been imposing extra charges on different products originating from China.  

The Reason

On August 14, 2017 the US Trade Representative initiated an eight-month investigation into China's labor laws, practices, and policies to find any actions that harm American Intellectual Property (IP) rights or technology development, and innovation. In March, 2018 the USTR section 301 report detailed some discrepancies.

Forced Technology Transfer via Foreign Ownership Restrictions. Through joint ventures, domestic Chinese firms and businesses forced foreign companies to give up blueprints, source code, and designs before any kind of approval. While the foreign partner retained some power during the process. However, once the state-owned partners learned the designs, the plans would be sent to domestic companies for manufacture and the company of origin would have no legal standing. Domestic partners even started to bid against the originating companies with their acquired plans.

Industrial Espionage. The People’s Republic of China (PRC) directed state-owned entities to acquire US technology companies. Between 2014 and 2018, Chinese companies invested tens of billions of dollars to complete this task, bypassing their own R&D on the acquired intellectual property, patents, and blueprints. Chinese companies bought avionics and aviation components manufacturers. If a buy out was too extravagant or obvious, Chinese companies would buy stakes, as with US firms developing robotics, AI, and electric vehicles.

State-sponsored Cyber Intrusion. China was found to have used military and state-affiliated intelligence to target commercial US servers, extracting trade secrets, financial data, and sensitive negotiations. 

The Response

To counter, the US imposed tariffs covering approximately $370B of Chinese imports of robotics, machinery, automotive, electronics, and others between 2018 and 2019. Duty for electric vehicles (EVs) increased from 25% to 100%. Solar cells and semiconductors duty elevated to 50% by 2025. Duty for lithium batteries and medical supplies were increased as well.

Also part of the sanctions, Chinese forced labor practices came into question, giving the US ammunition for a 25% surcharge on all imports.

Global Implications

Over the years, China has been slowly positioning itself as an alternative source of aid to the United States. Through foreign and military aid, they have instilled themselves as a super power also desiring to help the less fortunate. With tariffs placed on Chinese goods unilaterally (without the World Trade Organization), China will now focus on providing products to the rest of the world, and for cheaper than they would have offered to the US. Given that the US has already pulled out of the UN and the US administration seems to be alienating other countries once thought of as allies, China will have little problem finding customers. 

Even though much of the fabrication is sent to other countries, such as Mexico, India, and ASEAN countries, China still remains in the supply chain by supplying semiconductors and other raw components to make those products. Developing countries once dependent on the US are now open to receive those goods from China at a cheaper price. Chinese companies have already adapted by offering cheaper consumer goods to alternative markets, furthering their hold on the market. 

Since the installment of the heavy tariffs, China's trade with other countries has boomed causing them to log a $1.2 trillion trade surplus. Export to ASEAN countries increased by 30%. Exports to African countries jumped by 26%. And while there are tensions with the US government, the internet offers a “direct to consumer” capability that provides a work around – the American buyer can still get the product at a decent price. 

The tariffs, while intended as a punitive measure, will have an adverse effect. Other countries will benefit from the tensions and the American consumer will likely still buy the products sold by Chinese manufacturers. The countries that fabricate products still get their components from China, now at a cheaper price. From these measures, China has only benefited and gained more political power.  

Sources:

Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The impact of the 2018 tariffs on prices and welfare. Journal of Economic Perspectives, 33(4), 187–210. https://www.aeaweb.org/articles?id=10.1257/jep.33.4.187

Bown, C. P. (2020). US-China Phase One tracker: China's purchases of US goods. Peterson Institute for International Economics. https://www.piie.com/research/piie-charts/2020/us-china-phase-one-tracker-chinas-purchases-us-goods

Federal Reserve Bank of Dallas. Research on China’s export surge & global tariffs. https://www.dallasfed.org/research/pubs/25trade/a3

Flaaen, A., & Pierce, J. (2019). Disentangling the effects of the 2018–2019 tariffs on a globally connected U.S. manufacturing sector (Finance and Economics Discussion Series 2019-086). Board of Governors of the Federal Reserve System. https://www.federalreserve.gov/econres/feds/files/2019086pap.pdf

Lowy Institute. Navigating the storm: Southeast Asia and global trade shocks. https://www.lowyinstitute.org/publications/navigating-storm-southeast-asia-global-trade-shocks

Office of the United States Trade Representative. (2018, March). Section 301 fact sheet. https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/march/section-301-fact-sheet

Office of the United States Trade Representative. (2018, November). Update on China's acts, policies, and practices related to technology transfer, intellectual property, and innovation. https://ustr.gov/sites/default/files/enforcement/301Investigations/301%20Report%20Update.pdf

Office of the United States Trade Representative. Statutory four-year review authority (19 U.S.C. § 2417(c)). https://ustr.gov/trade-topics/enforcement/section-301-investigations/section-301-china-technology-transfer/china-section-301-tariff-actions-and-exclusion-process/four-year-review

Section 301 Statutory Authority, 19 U.S.C. § 2411. https://uscode.house.gov/view.xhtml?req=(title:19%20section:2411%20edition:prelim)

U.S. Customs and Border Protection. Uyghur Forced Labor Prevention Act (UFLPA). https://www.cbp.gov/trade/forced-labor/UFLPA

Xinhua. (2026, August 12). China-ASEAN trade & intermediate goods data. https://english.news.cn/20260812/d6f56ef02648432fb2587ba0ff15f7be/c.html