On March 22, 2018, President Trump signed a memorandum that marks the start of a multi-faceted trade offensive against China designed to respond to the Administration’s findings of misappropriation of US intellectual property and discriminatory technology licensing practices.
First, the President directed the US Trade Representative to publish a proposed list of approximately 1,300 products of Chinese origin that would be subject to an additional 25 percent ad valorem tariff. The affected products are expected to be heavily geared towards the technology sector. The publication of the list must be made within 15 days of today’s announcement, but there are indications it will be published on March 27, 2018. However, the additional tariffs will not be imposed until after a 30 day notice and comment period, which may include a hearing. The White House Memorandum is available here.
President Trump’s historic decision is based on the USTR’s affirmative finding in its investigation initiated on August 18, 2017 pursuant to Section 301 of the Trade Act of 1974 (19 U.S.C. § 2411) into the acts, policies, and practices of China related to technology transfer, intellectual property, and innovation. Section 301 provides authority to take broad action, including retaliation, if a foreign government’s actions are found to be unreasonable or discriminatory and burden or restrict US commerce. The USTR’s report detailed findings of China’s discriminatory licensing requirements; foreign ownership restrictions that required technology transfers from US companies to Chinese entities; state-funded acquisition of US companies to obtain IP and generate technology transfers to grow domestic industries deemed important by the Chinese government; and state-backed hacking into the networks of US companies to access IP, trade secrets, and other sensitive business information. The USTR estimates the value of the alleged IP theft to be in the hundreds of billions of dollars.
In addition to the tariffs, the Administration instructed the Treasury Department to propose restrictions on investment in the US by Chinese-controlled entities and funds in industries or technologies deemed important to the US. The Administration also instructed the USTR to initiate dispute settlement proceedings against China in the World Trade Organization to address China’s alleged discriminatory technology licensing practices.