The Office of the United States Trade Representative (USTR) published the results of its Section 301 investigation into China's semiconductor industry in the Federal Register, but for now set the additional tariff rate on Chinese semiconductors at 0%. The move is seen as calibrating pressure in light of the U.S.-China trade talks being in a "truce" phase.
USTR said on the 23rd (local time) that it determined China's policies and practices deployed to secure dominance in the semiconductor industry are unfair and burden or restrict U.S. commerce. However, while acknowledging the need to respond, it set the additional tariff rate at 0%.
Instead, it gave notice that it will raise the tariff rate on June 23, 2027, which is 18 months from now. It said it will announce the specific tariff rate at least 30 days in advance.
Section 301 of the Trade Act is a provision that authorizes the administration to take countermeasures such as a tariff when it determines that unfair, unreasonable, or discriminatory measures by a foreign government restrict or burden U.S. trade. The investigation began Dec. 23, 2024, at the end of the previous Biden administration.
USTR assessed that China has, for decades, used "increasingly aggressive and broad non-market policies and practices" that have "severely disadvantaged U.S. corporations and workers and the U.S. economy." It cited massive subsidies, pressure for technology transfer, intellectual property infringement, opaque regulations, wage suppression, and state-led planning as problems.
Observers say the decision to delay a tariff increase reflects a "truce" trend as the two countries continue trade talks. President Trump and President Xi Jinping met in Busan on Oct. 30 and were reported to have agreed in principle on a framework centered on tariff cuts and a suspension of rare earth export controls, and to continue their dialogue. The United States' one-year deferral of measures following Section 301 investigations into the maritime, logistics, and shipbuilding sectors is cited in the same context.
Bloomberg viewed the decision as the Trump administration sending a signal of stabilizing relations with China, while Reuters interpreted it as a move to ease tensions amid rare earth export controls.
Although additional tariffs have been put on hold, Chinese semiconductors are already subject to a 50% tariff. A 25% tariff was imposed during Trump's first term, and the Biden administration raised it so that 50% applies starting this year.