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White House officials consider probe into China’s industrial subsidies

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US-China relations updates

Senior US officials are debating whether to open an investigation into China’s use of industrial subsidies, in a move that could spark an escalation in trade tensions between Washington and Beijing.

The discussions within Joe Biden’s administration could ultimately lead America to impose a new round of punitive tariffs on products from China, although such a step is still a long way away.

According to people familiar with the matter, Katherine Tai, the US trade representative, and Gina Raimondo, the US commerce secretary, have considered launching a probe of China’s subsidies under section 301 of the 1974 Trade Act.

This is the same legal framework used by Donald Trump’s administration to impose tariffs on $360bn of China’s products during his time in the White House. The USTR office, the commerce department and the White House declined to comment. Bloomberg News first reported that the Biden administration was considering such a step.

A move to open a new investigation into unfair trade practices by China would follow the Biden administration’s growing frustration that Beijing has not fundamentally shifted away from its heavy use of industrial subsidies to prop up strategically important sectors in recent years.

The trade truce struck between Trump and Xi Jinping, China’s president, in January 2020 did not include any big and enforceable commitments by Beijing to change its industrial subsidies, leaving it as a big source of strain in the economic relationship.

Since taking office this year, Biden has preserved Trump’s tariffs despite pressure from US business groups to reduce or eliminate them to ease costs for American importers. A decision to launch a new trade probe against Beijing would suggest that it is moving in the opposite direction.

This week, Biden held only his second phone call as president with Xi, seeking to reset their relations after US officials concluded that lower-level engagement was not making sufficient progress.

According to the White House account of the call with Xi, Biden “underscored the United States’ enduring interest in peace, stability and prosperity in the Indo-Pacific and the world, and the two leaders discussed the responsibility of both nations to ensure competition does not veer into conflict”.

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