House panel urges tougher trade rules for China, raising chance of more tariffs if Congress agrees

WASHINGTON — A special House of Representatives committee focused on China is calling for changing the way the US handles Chinese goods, possibly subjecting them to higher tariffs, even as it threatens to escalate tensions between the two economic superpowers to increase.

The report does not specifically call for the withdrawal of China's preferential trade status, but does recommend placing China in a new trade category, which some liken to a de facto withdrawal. The committee chairman said he envisions a process in which Congress will regularly determine which economic sectors will be subject to higher rates and which will be subject to lower rates.

Lawmakers from both parties supported the proposal, reflecting a growing willingness in Congress to build on the tariffs passed during Donald Trump's presidency, even if it risks retaliation from China that will hit many farmers, would hurt ranchers and American exporters.

The committee arrived at its advice after several months of deliberation and hearings. Members hope the report's nearly 150 recommendations, many of which focus on trade, can be adapted into legislation that Congress could pass before next year's elections.

“You have to play by the rules, and if you don't, we have to protect our businesses from subversion and destruction,” said Rep. Raja Krishnamoorthi, the top Democrat on the committee.

Just over two decades ago, Congress granted China preferential trade treatment in the form of lower tariffs and trade barriers. The committee essentially called for an end to it. The shift would happen in phases over a short period of time to give the U.S. economy time to adjust.

Tariffs increase the cost of goods to the importer and are usually passed on to the consumer. The committee calls for using revenue from higher tariffs to expand market opportunities for U.S. manufacturers and promote national security.

“It's a strategy that obviously involves tradeoffs, but I think this strategy is based on the recognition, at a minimum, that the status quo isn't working,” said Rep. Mike Gallagher, the committee's Republican chairman.

In the event of retaliation from China, the committee said Congress should also consider additional spending to compensate for harm to farmers, ranchers and other American workers.

The US Chamber of Commerce said China has failed to deliver on the structural reforms it promised when it joined the World Trade Organization and was granted permanent normal trade status with the US. It said China deserves criticism and a strong policy response. But instead of a “de facto withdrawal” of China's trade status, the country called for more targeted approaches through existing legislation.

“Repealing PNTR would inflict heavy losses on American farmers and ranchers in the core states, American manufacturers of all sizes and families struggling with high prices,” said Charles Freeman, senior vice president for Asia at the U.S. Chamber of Commerce.

The need to confront China economically appears to be a common thread among lawmakers' agreement. It's part of the rationale lawmakers used in approving new investments in semiconductor manufacturing and research in 2022.

But the two countries are highly dependent on the other economically. China accounted for 16.5% percent of total goods entering the US last year, amounting to $536 billion in imports. Meanwhile, the US exported $154 billion in goods and $41.5 billion in services. Any disruption to that flow of trade has the potential to upend broad sectors of the U.S. economy, a price lawmakers will have to weigh as they determine whether to enact the commission's proposed legislative fixes into law.

As part of its recommendations, the House committee is also calling for a lower threshold for imports to enter the US duty-free. It seeks to lower the current threshold for such treatment, which now stands at $800, to an unspecified lower amount, “with a particular focus on foreign adversaries,” including China.

Congress raised the US government's threshold for accelerated tax-free treatment from $200 to $800 in 2016. The number of products entering the US that benefit from the “de minimis rule” has skyrocketed since then. But those who support the higher threshold say it has lowered costs for many American small businesses and consumers, and that collecting duties on low-value shipments really isn't worth the government's expense and time.