Under President Trump’s leadership, the United States is committed to rebalancing the U.S.-China trade relationship to achieve more fair and reciprocal trade. On March 22, President Trump directed his administration to take actions to address China’s forced technology transfers, discriminatory licensing restrictions, state-directed acquisition of U.S. sensitive technology, and hacking of U.S. commercial networks.

In response to China’s forced technology transfers, the Office of the U.S. Trade Representative (USTR) published for public comment a proposed list of Chinese goods imports that may be subject to an additional 25 percent tariff. The proposed list, which contains products that unfairly benefit from China’s industrial policies, is subject to a final determination after a public comment process. It has an estimated trade value of $50 billion.

China has chosen to respond thus far with threats to impose tariffs on billions of dollars in U.S. exports, causing further harm to American workers, farmers and businesses — on top of the harm China’s unfair trade policies have already caused. Under the circumstances caused by China, the president on April 5 instructed USTR to determine whether an additional $100 billion in tariffs would be appropriate.

The administration estimates China’s unfair technology transfer practices cost the U.S. economy at least $50 billion per year.

The president based his directive on the findings of an extensive “Section 301” investigation by the U.S. trade representative. He had ordered this investigation in August 2017.

What is a Section 301 investigation?

As part of the Trade Act of 1974, Section 301 gives the U.S. trade representative authority to investigate and, with the president’s direction, respond to another country’s unfair trade practices. This Section 301 investigation included a thorough analysis of evidence, public hearings, consultation with private sector advisory committees, and input from academics, trade associations and U.S. workers.

What led President Trump to initiate the Section 301 investigation?

Donald Trump holding up signed document surrounded by people (© Evan Vucci/AP Images)
President Trump signs a memorandum ordering action on China’s unfair trade practices. (© Evan Vucci/AP Images)

The United States has worked for 14 years through various types of economic dialogues to resolve persistent issues with China’s trade policies and practices. But China has failed to bring about any fundamental shift in its policies, including its technology transfer practices. On August 14, 2017, President Trump determined that decisive action must be taken to protect U.S. businesses from China’s harmful actions. Initiating a Section 301 investigation under the Trade Act of 1974 gave USTR broad authority to analyze and address China’s unfair trade practices.

What were the findings of the Section 301 investigation into China’s trade practices?

The investigation identified acts, policies and practices of the Chinese government that are unreasonable, are discriminatory and unfairly burden U.S. commerce. Those include these actions:

  • Using restrictions on foreign ownership to require or pressure U.S. companies to disclose or transfer technology to Chinese entities in order to access the Chinese market.
  • Imposing discriminatory technology licensing requirements that deny foreign patent holders, including U.S. companies, basic patent rights and unfairly favor Chinese recipients over U.S. technology owners.
  • Unfairly directing investment in and acquisition of U.S. companies with the goal of large-scale technology transfer. For example, a Chinese government fund backed Apex, a Chinese company, in acquiring Lexmark International, a U.S. computer and printer manufacturer. Before the acquisition, Lexmark had sued the consortium for infringing 15 patents.
  • Conducting and supporting cyber intrusions into U.S. companies to obtain intellectual property, trade secrets or confidential business information, as when five Chinese military hackers were charged with hacking U.S. commercial networks.

What products are affected by the tariffs?

The 25 percent tariff targets industries that benefit from China’s unfair trade policies.

The sectors subject to the proposed tariffs include industries such as aerospace, information and communication technology, robotics and machinery.

In remarks at the signing of the March 22 presidential memorandum, Vice President Pence said, “The United States of America is taking targeted and focused action to protect not only American jobs, but America’s technology, which will power and drive an innovation economy for decades to come.”