WTO Panel Rules U.S. Section 301 China Tariffs Illegal

On September 15, 2020, a World Trade Organization the Panel released its report which concludes that the U.S. Section 301 tariffs in China are inconsistent with the U.S. WTO obligations because the additional duties apply only to products from China and thus fail to accord to products originating in China an advantage granted to the like product originating in all other WTO Members. The panel also said the tariffs are WTO-illegan because the additional duties are ordinary customs duties applied in excess of the rates to which the United States bound itself in its Schedule and accord imports from China "less favourable treatment" than that provided in the United States' Schedule.

The ruling is not legalling binding.

U.S. Trade Representative (USTR) Robert Lighthizer was dismissive.

“This panel report confirms what the Trump Administration has been saying for four years: The WTO is completely inadequate to stop China’s harmful technology practices,” said Ambassador Lighthizer. “Although the panel did not dispute the extensive evidence submitted by the United States of intellectual property theft by China, its decision shows that the WTO provides no remedy for such misconduct. The United States must be allowed to defend itself against unfair trade practices, and the Trump Administration will not let China use the WTO to take advantage of American workers, businesses, farmers, and ranchers. It is important to note that this report has no effect on the historic Phase One Agreement between the United States and China, which includes new, enforceable commitments by China to prevent the theft of American technology.”

IN MY OPINION: If Trump is re-elected, I believe he will keep the China tariffs. He has repeatedly stated that he likes tariffs as a tool to deal with China. It plays well with his base. Year after year, since China entered the WTO at the end of 2001, the U.S. issued an annual report on all the ways China is out of compliance with its WTO commitments and how that is harming the U.S. economy. And year after year the U.S. did nothing about it. Trump took action, and even his detractors concede that action against China was overdue.

IN MY OPINION: If Biden is elected I expect he will end the China tariffs quickly. Even though Biden may be forced to recognize that the U.S. must do something about China, he likely will say that Trump's tariffs on a wide swathe of trade, most of it unrelated to the underlying reason for the tariffs, is, arguable, a blunt instrument. Therefore I expect that Biden will suspend these tariffs and seek a more diplomatic and nuanced approach. Personally, I think such a more subtile approach will be unsuccessful, but I can easily see him going in that direction. He will likely also cite yesterday's WTO ruling as evidence that Trump has made the U.S. a rogue nation, embarrassed the U.S. internationally, and abandoned the U.S. long commitment to a rules-based interational trading regime.