Companies Say Section 301 Tariffs Have Cost Millions, Slowed Hiring, Not Stopped China
Hundreds of companies, as well as trade groups from agriculture, retailers and manufacturing, have told the Office of the U.S. Trade Representative that the Section 301 tariffs on $350 million in Chinese goods have not achieved their aim, have hurt U.S. businesses and, often, have not even moved production to other countries in Asia or to Mexico.
The comment period for the review of the action closed Jan. 17 just before midnight; nearly 1,500 comments were received.
A Massachusetts state house member, Orlando Ramos, argued on behalf of CRRC, a Chinese state-owned rolling stock manufacturer whose North American division produces subway cars for Boston, Philadelphia and Los Angeles. The Springfield, Massachusetts, location employees 334, Ramos said.
"Since 2018, CRRC MA has incurred $17m in additional tariffs," he said, with many components facing a 25% tariff. "Overall, tariffs will reach approximately $41 million spread across all three contracts." He said the tariffs jeopardize union jobs and raise fares for public transit.
iRobot,maker of Roomba, which has 894 employees, said the tariffs have caused collateral damage, even though the objective is good. The company asked for refunds of tariffs paid between Jan. 1, 2021, and Oct. 12, 2021, when its exclusion on robotic vacuums was restored. During that gap, iRobot paid tens of millions in tariffs.
It also argued that future exclusions should be company-, not product-specific, as they say that Chinese-owned firms have benefited from the exclusion. "USTR should alter the manner in which exclusions are administered, such that they can be accessed only by U.S.-based companies that have made substantial progress in divesting from operations in China," iRobot said."At the very least, USTR should create a mechanism to exclude Chinese-headquartered companies, particularly those that receive subsidies from the Chinese government, from benefiting from exclusions."
Moving much of U.S.-destined production to Malaysia meant higher unit costs, the company said. It has raised prices to partially offset tariffs.
Medline,a manufacturer and importer of medical goods, commented on 17 tariff lines that cover even more products, from plastic vomit buckets to drapes, covers, gowns, towelettes and oxygen-delivery tubing. For each product, it described how dominant China is, how much more it costs to source from Southeast Asia, Mexico, Central America, the U.S. or Canada, and, for some products, its fruitless or partially successful efforts to source outside China. Again and again, it wrote, "there is currently not enough international capacity available to move out of China."
It estimated how much hospitals pay as a result of tariffs -- or would pay, if there were not exclusions for the products -- which added up to more than $100,000 per hospital. That's even with many of the items only facing 7.5% duties.
"Medline recommends alternative federal government approaches to improve supply chain resiliency instead of negative incentives such as tariffs. Proactively supporting domestic or nearshored production via grants or guaranteed purchase agreements from federal entities such as the U.S. Strategic National Stockpile are better mechanisms that do not add costs to healthcare providers," it wrote.
AdvaMed,the trade group that represents Medline, said that about 40% of all medical equipment or consumables imported from China owe Section 301 duties, with about $1.25 billion of the imports subject to a 25% tariff, and $1.25 billion subject to a 7.5% tariff.
The tariffs have not countered China's ambition to dominate in advanced medical equipment, the group said. It said that China is moving up the value chain in categories covered by Section 301, such as CT scans, MRIs, ventilators and cardiac pacemakers.
"We provide this analysis because we want USG officials to understand that we are not underestimating the competitiveness of the Chinese industry nor the potential threat posed by the power and resources of the Chinese government. Rather, we think the Section 301 tariffs have not been the most effective tool to meaningfully respond to these challenges and have had the unintended consequence of undermining U.S. competitiveness in our sector."
Anchor Hocking, a housewares company with 680 manufacturing employees, and 80 white-collar employees in Ohio, said its glass molding equipment, plastic lids for glass storage sets, kitchen glasses, flatware and gadgets have all been hit with tariffs.
"While Anchor has been able to reclaim a portion of tariffs paid through exclusions and protests, the reimbursements represent only about one-third of the total tariff burden. 301 tariffs have been a significant portion of the company’s losses during the pandemic," the company said. "Anchor Hocking had planned to start up a second glass manufacturing furnace in Lancaster employing 100-120 union workers in 2020; this was delayed until 2021 as the additional capital investment was directly impeded by 301 tariff costs."
The company is trying to shift production of its plastic lids out of China. It said that when it had to raise prices due to tariffs, consumers shifted to knock-offs made in China.
Polaris Industries,a manufacturer of snowmobiles, motorcycles, boats and ATVs with 8,764 U.S. employees, said it has paid hundreds of millions of dollars in tariffs for components and for branded apparel. It listed 22 Harmonized Tariff Schedule codes that affect the company.
"Polaris has not seen any evidence that China has changed its acts, policies, and practices related to technology transfer, intellectual property, and innovation since 2018," the company wrote. "No modification to the tariffs -- aside from outright removal or substantial, permanent exclusions to protect key U.S. interests -- will make them more effective."
Most of Polaris' exclusions expired more than two years ago. It hiked prices and swallowed lower profit margins.
"With respect to jobs, Polaris has remained committed to its U.S. workers and has not reduced headcount or benefits, but the burden of the Section 301 tariffs has created an incentive to expand its foreign manufacturing footprint." It said the tariffs influenced its decision to add work in Mexico, and said it more than doubled its headcount in Mexico, which had been 2,670 before the tariff action.
It said it tried to find component suppliers outside China even before the tariffs were imposed, but was unable to.
Element Electronics,a television manufacturer in South Carolina, said it cut U.S. employment from 500 employees to less than 90 because of Section 301 tariffs on LCD panels and main boards and the end of the Miscellaneous Tariff Bill.
Its 301 exclusion was renewed, but Element had already started letting workers go before it found that out.
"The extension of those exclusions will now permit Element to begin reversing some of those cuts in employment and production," it said. Tariffs on LCD panels have not resulted in trade diversion -- Element said China accounts for 71% of global LCD panel production in 2022, an increase from 67% in 2021.
"Due to significant competition from imports from Mexico, consumer prices for finished TVs have actually declined since the imposition of the additional duties and thus there has been no negative impact on prices to consumers," the company said.
Two advanced battery producers submitted comments: LG Energy Solution Michigan,with 2,350 employees, and Panasonic Corporation of North America,which said it produces 90% of U.S.-made EV batteries.
Their comments made it clear how difficult it will be for the Inflation Reduction Act (IRA) to provide consumer tax credits on EVs, since no materials from China will be allowed a few years from now.
Both said they import artificial graphite and graphite preparations from China.
Panasonic said China has a 95% market share in refined graphite. There is an exclusion for this, but Panasonic imported a massive volume while the exclusion was under review.
And it said there are inverted tariffs on lithium-ion batteries compared with inputs, and so it has not added as many jobs as it had planned. "U.S. competitiveness with China and other third-country producers of critical technologies -- like EV batteries -- continues to erode. We respectfully recommend that USTR consider lowering the tariffs on inputs into lithium ion batteries to promote domestic manufacturing of lithium ion cells and batteries. The tariffs on inputs could be phased back in over time as IRA content requirements increase and more U.S. production comes online."
It also said: "Panasonic strongly believes that the so-called 301 China tariffs have significantly contributed to record-setting inflation. While some detractors of this theory might suggest that inflation would need to be extremely elastic to only have started to pick up this past year, Panasonic has experienced, first-hand, the recently renegotiated contracts with customers and suppliers that have led to market-wide price increases not just for consumer end goods, but also for other products within the supply chain."
Panasonic also makes key components for high-efficiency heat pumps, and said that while there have been exclusions to support U.S. manufacturing, its customers are considering moving that work to Mexico to avoid the uncertainty and get lower labor costs.
While the Section 301 action was aimed squarely at Chinese industrial policy for goods like batteries, tariffs have been levied on many other goods that have no links to economic strategy, like food, costume jewelry and toaster ovens, Panasonic said.
Claire's,a retailer aimed at tween girls with 9,600 employees, said the tariffs affect 35% of its wares, or 291 tariff codes, and since many of the products already have high Most Favored Nation duties, the combined rate can be 40% or more. It said the average price of a Claire's product is $10. "Taxing the affordable, everyday items targeted to young consumers -- such as makeup, erasers, hair accessories, and earrings -- simply does nothing to further the goals of the 301 action." It said between wage inflation, higher rents and the tariff costs, it has reduced employment.
Coleman,a camping goods brand with 818 U.S. workers, said tariffs on camping chairs, portable camping stoves and portable grills have forced higher prices, lost sales and lower profits. It said China makes 91% of these products, and it has tried and failed to find other vendors in other countries.
The Outdoor Industry Association, which represents Coleman, said tariffs have hit "components for domestically manufactured sleeping bags, climbing equipment, children’s bicycle helmets, and belts made from recycled water bottles." It also listed 17 consumer goods in the sector hit with tariffs. It said there has been some reduction in exposure only because importers realized they could attribute country of origin to the country that made technical fabrics for some goods, such as Taiwan or South Korea.
"We estimate the outdoor industry has paid a total of $7.1 billion in Section 301 tariffs since their imposition," the group said.
Companies want to source outside China, but need the renewal of the Generalized System of Preferences benefits program to help establish expertise in other countries, the group said.
The National Fisheries Institute, a trade group, said U.S. producers have paid $750 million in Section 301 tariffs on fish, even with $250 million in tariff exclusions. It cited USTR testimony in the Court of International Trade that fishing is not related to the 301 goal. And it said that the tariff on food is a highly regressive tax.
Sunbeam,which has 450 U.S. employees, said it's paying tariffs on toaster ovens and air fryers, though China has 95% market share in those goods, as well as tariffs on coffee makers. Sales have dropped as prices had to go up.
For its vacuum sealing systems, Sunbeam wrote: "We found that even though we were successful in locating alternatives to assemble the finished good, most components and raw material still required a reliance on China sources of supply, which would prevent our ability to meet the substantial transformation required to eliminate the tariff."
Pratt & Whitney,a jet engine manufacturer, said it doesn't pass along the cost of tariffs on disks, compressors, cases, shields, nozzles, shims, shroud, cover, retainers, ring assemblies, parts of gearboxes and roller bearings.
"We are at a significant disadvantage in sales campaigns both in the United States and other markets against foreign competitors that do not face these duties on manufacturing inputs sourced in China," the company wrote.
Although aircraft technology is targeted in the action, the company said it keeps the advanced aspects of its production in the U.S.
People for Bikes said the best thing the U.S. could do to support U.S. bike manufacturing -- which is limited to high-end and electric bikes -- "would be lowering the de minimis threshold from $800 to $200 to reduce unregulated direct to consumer imports of bicycles, electric bicycles and bicycle products. This would help stem the increasing flow of substandard products, including bicycles, electric bicycles and lithium ion batteries, that enter the country without payment of any duty, and without proof of safety testing or compliance."