On December 11, 2024, the US Trade Representative (USTR) announced modifications to tariff actions under Section 301 of the Trade Act, targeting specific Chinese products. These measures aim to address long-standing issues related to China's technology transfer, intellectual property practices, and innovation policies. The updated tariffs, which will take effect on January 1, 2025, include new rates on tungsten products, polysilicon, and wafers.
The rates for solar wafers and polysilicon will increase to 50%, and the rates for certain tungsten products will increase to 25%, as per the Federal Register notice and Thompson Hine LLP.
Tariff Increases
The new tariffs include a 25% rate on three subheadings of tungsten products:
1. 8101.94.00: Unwrought tungsten, including bars and rods obtained by sintering.
2. 8101.99.10: Tungsten bars and rods (excluding sintered products), profiles, plates, sheets, strips, and foils.
3. 8101.99.80: Other tungsten articles.
Additionally, a 50% tariff will be imposed on two subheadings related to polysilicon and wafers:
1. 2804.61.00: Silicon containing by weight not less than 99.99% purity.
2. 3818.00.00: Chemical elements and wafers doped for use in electronics.
The measures above align with US objectives to strengthen critical domestic industries and reduce reliance on Chinese imports.
Background
This decision follows a comprehensive four-year review published in May 2024, assessing the effectiveness of earlier tariffs imposed on Chinese products. The review concluded that additional measures were needed to counteract China's unfair trade practices and bolster US industries.
Public comments were invited throughout 2024, with many stakeholders advocating for increased tariffs to enhance domestic supply chains and mitigate vulnerabilities in critical sectors.
Escalation in US-China trade tensions
As President-elect Donald Trump prepares to take office in January 2025, trade tensions between the US and China have intensified, with both nations adopting significant measures to bolster their strategic positions.
These measures aim to protect domestic industries and counteract China's trade practices, as noted by AP News. Additionally, the US expanded export controls, adding 140 Chinese companies, including Naura Technology Group, to its Entity List to restrict China's access to advanced semiconductor technologies, Reuters reports.
In response, China imposed export bans on critical minerals such as gallium, germanium, and antimony, essential for semiconductor and military applications. These restrictions highlight China's leverage in key global supply chains. Furthermore, China launched an antitrust investigation into Nvidia, signaling its willingness to scrutinize US firms operating within its borders, as noted by Barron's and Reuters.
The trade measures have prompted market adjustments on both sides. Chinese policymakers have hinted at weakening the yuan to offset US tariffs, a move that could escalate into a global currency war. Meanwhile, US importers have accelerated shipments to mitigate the impact of new tariffs and potential port strikes, driving record-level import volumes.
These developments reflect the escalating trade war as both nations maneuver to protect their economic interests, with the potential for further actions as the new US administration assumes office.
Rationale for tariffs
The tariffs on tungsten products are intended to enhance the resilience of US industries such as aerospace, defense, and medical technology by reducing dependence on China, which controls approximately 80% of global tungsten reserves.
For polysilicon and wafers, the higher tariffs aim to support the US solar cell production industry, foster alternative supply chains, and protect domestic investments. These measures are particularly critical given China's dominance in the polysilicon market and its substantial production capacity.
Public feedback
The USTR received mixed responses to the proposed tariffs. Supporters highlighted the importance of tariffs in enhancing national security, boosting domestic competitiveness, and encouraging supply chain diversification.
On the other hand, opponents raised concerns about increased production costs, inflation, and limited alternative sources outside China. Despite these concerns, the USTR determined that the tariffs were necessary to achieve long-term strategic goals.
Technical corrections and future actions
The USTR addressed technical corrections to the Harmonized Tariff Schedule of the US (HTSUS), including adjustments to earlier tariff schedules. For instance, it clarified the 100% duty on medical gloves of vulcanized rubber, which will take effect on January 1, 2026, under subheading 9903.91.08.
Future modifications will consider ongoing public feedback and the evolving trade landscape, ensuring the measures remain aligned with US economic and strategic objectives.
Conclusion
These actions underscore the US government's commitment to countering China's trade practices, safeguarding domestic industries, and fostering supply chain resilience. While the tariffs may result in short-term price increases, they are viewed as critical for achieving broader economic and strategic goals. The USTR will continue to monitor the effectiveness of these measures and explore further adjustments as necessary.
