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Legal Alert: China faces potential new trade restrictions

Legal Alert: China faces potential new trade restrictions
  • Hong Kong
  • International trade
  • Technology


Today President Trump signed a memorandum directing Administration officials to proceed with the imposition of trade restrictions on China and Chinese products in retaliation for China’s unfair intellectual property practices. The President’s action is based on an investigation by the Office of the United States Trade Representative (USTR) under Section 301 of the Trade Act of 1974. Section 301 authorizes the President to take unilateral action against a foreign country that violates US rights or engages in unreasonable or discriminatory practices. The Presidential memorandum notes that the USTR investigation supports the following findings:

  1. China uses foreign ownership restrictions to require and pressure technology transfers from US companies to Chinese entities.
  2. China restricts and intervenes in US firms’ investments and activities, such as by imposing technology licensing terms that are unfair to US companies.
  3. China directs and systematically facilitates investment in and acquisition of US companies and assets by Chinese companies to obtain advanced US technologies.
  4. China conducts and supports unauthorized intrusions into, and theft from, the computer networks of US companies.

Based on USTR’s findings, the President has ordered three actions:

  1. Within 15 days, USTR will prepare a list of proposed Chinese goods on which to impose new tariffs. Following a comment period and consultations, USTR will, if appropriate, publish a final list of affected products and tariff increases.
  2. USTR will pursue dispute settlement in the World Trade Organization to address China’s discriminatory licensing practices.
  3. The Secretary of the Treasury will propose measures to address concerns about Chinese investment in industries or technologies deemed important by the United States.

The President’s action under Section 301 represents a significant escalation of the Administration’s efforts to use the Presidential authority to take unilateral actions against imports. Other recent measures have included the Section 201 decision imposing tariffs on imports of solar cells and panels and the increased duties the Presidential proclamations of March 8, 2018, levied on imports of aluminum and steel products pursuant to Section 232. If the US imposes Section 301 measures, China is expected to retaliate against US exports in such areas as agriculture, specifically citing tariffs on the US soybean industry as one target.

We are following these and related trade developments closely and are available to provide further guidance as this situation unfolds.