The United States will reopen talks with China over its failure to comply with the trade deal signed during the Trump administration and restart a process for U.S. companies to win exemptions from tariffs on Chinese products, U.S. Trade Representative Katherine Tai said on Monday in a speech laying out the Biden administration’s trade approach to world’s second-largest economy.
“For too long, China’s lack of adherence to global trading norms has undercut the prosperity of Americans and others around the world,” Tai said at the Center for Strategic and International Studies in Washington. “To be successful, we must be direct and honest about the challenges we face and the grave risk from leaving them unaddressed.”
The highly anticipated speech was meant to outline the results of an eight-month review of former President Donald Trump’s trade policies toward China and sets the tone for Biden’s plans to press Beijing on tariffs, trade commitments and other economic issues between the two nations. American lawmakers and corporations have urged the White House for months to lay out its strategy and provide some relief from Trump’s tariffs on Chinese products.
Tai stopped short of threatening any new trade actions against China, but confirmed that tariffs Trump imposed on more than $350 billion worth of Chinese goods will stay in place for now. And if China does not address U.S. concerns, more duties or other trade restrictions could be imposed.
“I am committed to working through the many challenges ahead of us in this bilateral process in order to deliver meaningful results. But above all else, we must defend — to the hilt — our economic interests,” Tai said.
She added that the Biden administration did not want to “inflame trade tensions with China” and a big part of the solution required the United States to increase its own competitiveness, in a not-so-subtle appeal to Congress to pass massive infrastructure bills.
“China and other countries have been investing in their infrastructure for decades. If we are going to compete in the global market, we need to make equal or greater investments here at home,” she said.
The U.S. trade chief described her remarks as just “the starting point of our administration’s strategic vision for realigning our trade policies towards China to defend the interests of America’s workers, businesses, farmers and producers, and strengthen our middle class,” indicating that more is to come.
She also criticized Trump’s phase one deal for failing to significantly change China’s trade practices that hurt the U.S. economy.
“Even with the phase one agreement in place, China’s government continues to pour billions of dollars into targeted industries and continues to shape its economy to the will of the state – hurting the interests of workers here in the U.S and around the world,” Tai said, singling out Chinese government activity in the steel and the solar energy sectors as particular concerns.
Tai said she plans to talk in the coming days with her Chinese counterpart, presumably Vice Premier Liu He, who was China’s lead negotiator for the phase one deal. But she did not say whether Liu was actually who she would speak to, or whether the Chinese have accepted an invitation to talk. An inquiry to the Chinese embassy in Washington was not immediately returned.
In addition to the areas where China has fallen short in the implementation of that agreement, “we continue to have serious concerns with China’s state-centered and non-market trade practices that were not addressed in the phase one deal,” Tai said. “As we work to enforce the terms of phase one, we will raise these broader policy concerns with Beijing.”
Tai’s speech adds to comments she made in an interview with POLITICO on Thursday, when she said the Biden administration plans to confront Beijing for failing to fulfill its obligations under a Trump-brokered trade agreement, using the tariffs that Trump imposed as a foundation for that interaction.
Beijing is still behind in meeting the purchase obligations for farm goods and other products under the phase one deal before it expires at the end of the year. In August, Chinese imports covered by the deal amounted to less than 70 percent of the goal for that point in the year. Recently, Biden officials have slammed the Chinese government for blocking specific imports, such as the sale of Boeing planes to Chinese airlines.
In a nod to American corporate interests, Tai said the federal government will reopen an exemption process for certain companies to win relief from tariffs on China. That was a key ask of American firms who say the duties are driving up costs for manufacturers and consumers alike, particularly if no duties are lifted in the near future.
“We will start a targeted tariff exclusion process,” Tai said, and “keep open the potential for additional exclusion processes in the future,” though the scope of the program was not detailed.
The U.S. will not look to trash the entire phase one deal, signed between Trump and Chinese President Xi Jinping at the start of 2020, Tai said. Instead, American negotiators will try to preserve parts of the deal they say have benefited Americans, such as Chinese agricultural purchase commitments that have resulted in record U.S. sales to the country, even though they fell behind the pact’s targets.
How those conversations will take shape remains unclear. Administration officials said Sunday that the U.S. would not pursue a phase two deal to address more structural issues with the Chinese economy, such as government support for its domestic industries, but Tai did not mention further negotiations in her speech. A second, expanded pact was a key plan of Trump trade officials, but the Biden White House said it had little hope negotiations would convince China to change its behavior.
The administration’s tariff strategy is equally uncertain. The White House is reportedly considering a new investigation using Section 301 of the 1974 Trade Act to strike back at China’s use of industrial subsidies. The U.S. could use China’s failure to comply with the phase one deal as a reason to impose new tariffs under that investigation, or reconfigure duties already in place, but Tai was coy about the negotiating strategy.
“Section 301 is a trade enforcement tool. It is a very, very important tool,” she said. “We will look at all available tools in addressing our concerns and ensuring that we are able to defend the interests of the American economy.”
Doug Palmer contributed to this report.