As the U.S. election is five months away, warnings have been issued to monitor the trend of anti-China legislation in the U.S. Congress. Amidst the competitive anti-China trade offensive by U.S. presidential candidates, the U.S. Congress is pouring out unprecedented China-related bills, which could directly or indirectly harm Korean businesses.
According to a report titled “Trends and Implications of U.S. Congressional Anti-China Legislation,” published by the Korea International Trade Association (KITA) on June 9, 376 China-related bills have been proposed in the nine months since the 118th U.S. Congress opened. Compared to the 474 and 432 bills related to China in the 116th and 117th Congress, an unprecedented legislative offensive is expected. The main anti-China measures currently under review by the U.S. Federal Congress are high tariff measures, withdrawal of Permanent Normal Trade Relations (PNTR) status, and the prevention of indirect exports through Mexico.
PNTR status is the basis for the U.S. to automatically apply most-favored-nation tariffs to non-market economies without regular congressional review. The U.S. granted PNTR status to China in 2001 on the condition of World Trade Organization (WTO) membership and market opening.
The U.S. Congress has continuously urged the Biden administration to strengthen Section 301 measures on strategic items such as electric vehicles (EV), shipbuilding and shipping, steel, and aluminum. This law allows the president to take necessary measures against unfair trade practices that negatively affect U.S. trade and investment. The Congress has also proposed to invoke Section 232 of the Trade Expansion Act to respond to national security threats posed by imports of Chinese products and to reintroduce China’s Special Safeguard Measures.
The China Special Safeguard Measures relaxes the requirements for proving domestic industry damage due to a surge in imports from China compared to the WTO general safeguard measures. They were introduced at the time of China’s WTO accession but abolished in 2013.
The Republican-led House of Representatives established a Special Committee on China at the start of the 118th Congress and has been developing a bipartisan policy on China. Based on this, a policy recommendation report containing 130 legislative regulations was adopted in December 2023. It included establishing a basis to levy high tariffs on all Chinese products by revoking China’s PNTR status.
In the report, KITA explained, “The revocation of China’s PNTR status does not immediately lead to a comprehensive tariff increase, but unlike anti-dumping and countervailing duty measures that need to be introduced after separate investigations, it can impose high tariffs at any time,” and “it can be used as a means to pressure China.”
Concerns are growing in the U.S. that Chinese EVs could enter the U.S. market by bypassing Mexico to avoid tariff measures. Suppose Chinese companies produce and assemble EVs in Mexico and export them to the U.S. In that case, they can receive preferential tariffs under the United States-Mexico-Canada Free Trade Agreement (USMCA) and tax deductions under the Inflation Reduction Act (IRA).
The U.S. Congress is considering various measures to regulate EVs produced by Chinese companies in third countries. There is also a proposal to impose regulations based on entities rather than exporting countries.
The report predicted, “The chances of these bills passing within the session are not high, but if they are reintroduced in the next session, they are likely to be processed bipartisanly.” It also speculated that if the Republican party wins the presidential election and takes control of both houses, containment against China could accelerate.
The problem is that the strong stance of the U.S. Congress against China could have a significant direct or indirect impact on South Korean companies. If China’s indirect exports through third countries are blocked. South Korean companies using Chinese raw materials or intermediates could face unforeseen disadvantages.
If China’s barriers to entering the U.S. market increase, it could expand exports to third countries as alternative markets, intensifying competition between Korea and China.
Senior Researcher Han Ah Reum of the Trade Association advised, “Not only the president’s authority but also the role of Congress, which sets policy agendas, is important in changes in U.S. trade policy. So the trends of congressional elections should also be monitored.”