With Trump gone, Republicans look to weaken his China tariffs

Congressional Republicans continue to talk tough about confronting China economically, echoing the populist rhetoric of former President Donald Trump. But with Trump and the political cover he provided gone from Washington, GOP senators are turning away from some of the most restrictive China trade policies his administration instituted.

Exhibit A: Republicans are balking at the protectionist trade provisions included in House legislation to help the U.S. economy compete with China, which passed the lower chamber with only one GOP vote.

Instead, Republicans are pushing to approve the Senate version of the legislation, which would roll back some of Trump’s tariffs on China — something the Biden administration has been reluctant to do. And they’re threatening to pull their support for the legislation entirely if certain House trade proposals are approved by the conference committee currently negotiating the final text. Given that the final legislation will ultimately need GOP votes to get through the Senate, that gives the more traditional, pro-trade wing of the party the upper hand in the negotiations — bucking protectionist impulses that have been on the rise in both parties in recent years.

The Senate bill “needs to be the foundation” of what comes out of the conference committee, said Senate Finance Committee Ranking Member Mike Crapo (Idaho), who crafted the Senate trade title with committee Chair Ron Wyden (Ore.) and has called for a more “thoughtful” application of Trump’s China tariffs. He was echoed by Sen. Todd Young (Ind.), the lead GOP sponsor of the China legislation in the Senate, who said the final product would have to “resemble fairly closely the Senate bill in order to retain Republican support.”

The cross-chamber showdown demonstrates how many Republicans, no longer in Trump’s shadow, are joining Senate Democrats in trying to unwind some of the last administration’s most protectionist trade policies. Only three Republicans voted against the trade provisions in the Senate bill during the floor debate last year — Sens. Marco Rubio (Fla.), Tom Cotton (Ark.) and Josh Hawley (Mo.) — and none of them were named to the conference committee that will reconcile the two bills.

The GOP shift on trade has drawn criticism from Trump acolytes. Hawley, one of the party's most strident China hawks, slammed the Senate's trade language when it surfaced last year, saying he “can’t support a bill that harms American workers and cuts tariffs on products made in China in the name of ‘increased competition.’” And Trump’s former trade chief, Robert Lighthizer, lamented in an op-ed earlier this year that “state planners in China … must be positively gleeful that it would effectively drop the existing Section 301 tariffs and eliminate much of the threat of future tariffs altogether.”

Lighthizer called on “the House of Representatives and President Biden to save us from this folly.”

The embrace of more trade-friendly policies is a welcome development, however, for major corporate advocacy groups, a traditional GOP constituency, who scrambled last year to keep trade-restricting provisions out of the Senate package, only to see a number of them revived in the House.

The U.S. Innovation and Competition Act, which the Senate passed by a vote of 68-32 last June, would actually make it easier for many firms to trade with the world’s second largest economy. That’s because it would reinstate more than 2,200 exceptions to the tariffs on China that the Trump administration imposed, allow refunds for firms whose exemptions expired at the end of 2020, and direct the U.S. trade representative to allow new companies to apply for exemptions. Thus far, the Biden administration has refused to remove the Trump-era tariffs and only awarded exemptions on a narrow set of 359 products.

House Democrats, labor allies and populist groups that supported Trump’s tariffs are all lobbying for the more aggressive trade provisions included in the U.S. COMPETES Act the chamber approved in February. Among other things, the bill would impose tariffs on small-value imports from China, strengthen federal tariff tools against Beijing, renew relief funding for victims of offshoring, and impose new government screening on U.S. firms that invest in the Chinese mainland.

The disagreements on trade are the biggest single threat to the overall China bill, whose foundational provision — $52 billion for semiconductor manufacturing — is a priority for leaders of both parties. The White House is desperate for a midterm-year win that passing the law would represent. But it is a delicate balancing act: change the Senate trade title too much, and risk essential GOP support in the Senate, where the bill must garner 60 votes. But ignore the Democrats’ proposal, and some progressives could defect, threatening the legislation in the House, where it passed with a 12-vote margin.

“It’s clear that the carefully pieced together Senate trade title — and the bipartisan votes it brought with it — was critical to Senate passage of the bill last year,” said Rory Murphy, vice president for government affairs at the U.S-China Business Council, which is lobbying for the Senate’s looser trade restrictions. “If conferees make substantial changes to the Senate trade language, or add in some of the more controversial House trade provisions, it will likely jeopardize the broader legislation.”

That’s what happened to the Senate bill last year, when opposition from the U.S-China Business Council and Chamber on the trade provisions held up the bill for days and imperiled its passage. Ultimately, the controversial measures — including one that would establish government oversight of new American business ventures in China — were left out of the Senate legislation. But many of them were revived in the House bill months later.

To be sure, the Senate legislation isn’t a complete return to free trade. The bill would also strengthen Buy America rules for federal contracts, direct the U.S. trade representative to crack down on the trade of goods made with stolen intellectual property and reauthorize two tariff exemption programs while adding new labor and environmental rules for trading partners, though the House bill includes even more stringent rules on that front.

Still, many protectionist groups that cheered Trump’s policies think the bill is too friendly to corporate giants who have outsourced their supply chains to China — particularly given that the legislation that is supposed to confront Beijing economically.

“Too many Senate Republicans talk tough on China, but are actively pushing trade provisions in the China competition bill that are a gift to Chairman Xi and CCP-influenced companies,” said Michael Stumo, CEO of the Coalition for a Prosperous America, a protectionist group funded by labor and U.S.-based manufacturers hurt by Chinese imports, which supported many of Trump’s trade policies. “Lawmakers should jettison the Senate trade provisions in favor of the House-passed trade title, which preserves our trade remedies, stops China’s abuse of our customs laws, and is one of the most pro-worker trade bills introduced in Congress in decades.”

CPA and others are hoping to leverage rising public sentiment against free trade in both parties to strengthen the House's hand in conference. CPA has been shopping around a recent poll of 2000 registered voters they conducted with Morning Consult that shows broad support for aspects of the House Democrats’ trade title among Democrats, Republicans and Independents.

The stricter trade provisions in House Democrats’ bill are also supported by a number of labor unions including the AFL-CIO, Steelworkers, Teamsters and labor-aligned groups like the Alliance for American Manufacturing, as well as domestic corporate groups like the National Council of Textile Organizations and U.S. Footwear Manufacturers Association. All of those groups signed a letter to lawmakers urging them to fight for a provision in the House legislation that would impose tariffs on small-value imports from China.

The tariff provision is a key priority for House Democrats in the coming conference committee negotiations, said a Democratic staffer with knowledge of the plans. So is renewing and expanding Trade Adjustment Assistance, a $22 billion program to provide relief payments to workers whose jobs have been sent overseas.

Both priorities will face resistance in the conference negotiations. Renewing Trade Adjustment Assistance has typically happened alongside a vote on Trade Promotion Authority, which grants the president authority to negotiate new trade deals. Without the enhanced trade authority, Republicans have balked at passing expanded relief payments.

Ending small-value tariff exemption for Chinese imports could present an even bigger hurdle. Today, the provision allows any package worth under $800 to enter the U.S. without tariffs, increased from $200 in 2016. Meant to lower prices for consumers and small businesses, the law has been used by fast fashion companies like Shein to flood the American market with cheap, Chinese-made clothes. Rep. Earl Blumenauer (D-Ore.), the head of the House Ways and Means subcommittee on trade who has championed rolling back the provision, estimates more than 2 million packages enter the U.S. duty-free under the provision each day, about 80 percent of them from China.

A number of other trade provisions could derail the conference negotiations as well. The Biden administration, led by U.S. Trade Representative Katherine Tai, has voiced support for a provision in the House Democrats’ bill – the “Leveling the Playing Field Act” — to strengthen tariff authorities at the Commerce Department. And Secretary of Commerce Gina Raimondo has endorsed the idea of screening American investments in China, though she stopped short of saying it should be included in the legislative package Congress is now negotiating. Neither of those provisions was included in the Senate’s bill.