US-China trade: who will ‘targeted tariff-exclusion process’ help more, Chinese factories or American buyers?

Washington’s approval process for tariff exemptions has been called opaque and inefficient under Donald Trump and Joe Biden, and most exemptions have expired

Trade analysts expect the Biden administration to put the interests of US industry ahead of bilateral trade, even if doing so helps some Chinese manufacturers

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US Trade Representative Katherine Tai said this week that China’s trade practices have had “harmful impacts” on the US economy. Photo: AFP

Published: 12:00am, 6 Oct 2021Updated: 9:25am, 7 Oct 2021

Some factories and industries in China will benefit from the Biden administration’s upcoming “targeted tariff-exclusion process”, but US policy is still more focused on supporting American companies than it is on strengthening bilateral trade, according to analysts.

In a speech on Monday outlining Washington’s vision for trade ties with China, US Trade Representative (USTR) Katherine Tai also said that the Biden administration will “keep open the potential for additional exclusion processes”, as some tariffs are causing significant commercial harm to US interests.

This marked Tai’s first public statement since assuming her role at USTR on a significant policy area, but she did not share much information on what US-China trade policy will look like over the coming year and did not signal a shift in the overall trade policy towards China.

US stakeholders are typically permitted to petition for an exclusion if punitive tariffs placed on foreign products cause domestic commercial harm. Since former president Donald Trump slapped tariffs on imports of Chinese goods, companies have been filing requests to exclude certain Chinese products from punitive tariffs. Although there are three criteria for such an exemption, the process has come under scrutiny for not being transparent enough.

“There was a lot of criticism because US businesses couldn’t really use it very well. Only about 13 per cent of exclusion process applications were successful in the past, and most of them have now expired,” said Benjamin Kostrzewa, a Hong Kong-based trade lawyer with Hogan Lovells who worked on Tai’s team.