Calls to revoke China’s trade status widen in Washington

VOA News - Influential members of Congress, including the senator poised to become secretary of state in the incoming Trump administration, are pressing hard to revoke China’s Permanent Normal Trade Relations with the United States.

Commonly known as “Most Favored Nation” status, PNTR means that Chinese goods being imported into the United States are granted the most advantageous terms that the country offers when it applies tariffs and other restrictions.

China was granted PNTR in 2000, as it prepared for entry into the World Trade Organization. Since then, some of the advantages the status confers have been stripped away by sanctions applied by the first Trump administration and increased during the presidency of Joe Biden.

Completely removing PNTR would expose all of China’s vast array of exports to the U.S. — $427.2 billion worth in 2023 — to even higher levies. The tariffs imposed by the U.S. on goods from countries without PNTR range from a minimum of 35% to as high as 100%.

Currently, there are four countries in the world that do not have PNTR status with the U.S.: Russia, Belarus, North Korea and Cuba. North Korea and Cuba have never held PNTR status, while the PNTR status of Russia and Belarus was revoked after Russia’s full-scale invasion of Ukraine in 2022, which Belarus enabled.

If normal non-PNTR tariffs were levied on goods from China, and the increased tariffs applied by the Trump and Biden administrations under Section 301 of the Trade Act of 1974 were left in place, the average tax on Chinese imports could approach 60%. During his campaign this year, President-elect Donald Trump had suggested levying a 60% tariff on Chinese goods, although it is not clear how he arrived at that number.

This week, the congressionally chartered U.S.-China Economic and Security Review Commission issued its annual report to Congress. Among its recommendations for changing U.S. relations with China was PNTR revocation. The bipartisan panel, which has been issuing annual reports since 2002, had not previously made a unanimous call for PNTR revocation.

The report accused China of “engaging in practices such as intellectual property theft and market manipulation.” It said that PNTR repeal would improve U.S. leverage in trade negotiations and “would signal a shift toward a more assertive trade policy aimed at protecting U.S. industries and workers from economic coercion.”

Asked for comment on this story, Liu Pengyu, the spokesperson for the Chinese Embassy in Washington, emailed VOA a statement criticizing the commission.

"[The] U.S.-China Economic and Security Review Commission has long been issuing so-called reports about China, which are full of disinformation and smear, based on its entrenched bias about China," Liu said.

"On PNTR, following the agreement between China and the US on China’s accession to the WTO, the US announced in 2001 to grant permanent normal trade relations status to China. Attempts to pull the China-US trade and economic relations back to the Cold War era violates WTO rules, and will only harm the common interests of both countries, and disrupt the global economy."

The U.S.-China Economic and Security Review Commission report followed the introduction of a bill on November 14 by Representative John Moolenaar, chair of the House Select Committee on the Chinese Communist Party, that would officially end China’s PNTR status.

Moolenaar described granting China PNTR as an experiment that has failed, saying in a statement that repeal would “protect our national security, support supply chain resilience, and return manufacturing jobs to the U.S. and our allies.”

In September, similar legislation was introduced in the Senate. One of the key sponsors was Florida Senator Marco Rubio, whom President-elect Donald Trump has nominated to serve as secretary of state in his incoming administration.

Both bills include language that would specify that 100% tariffs be applied to a wide range of products imported from China, including consumer electronics, machinery and solar energy equipment.

Supporters of eliminating China’s PNTR status claim that doing so would lead to a boost in manufacturing in the United States, economic growth and an increase in well-paid jobs.

When the Senate bill to strip China of PNTR was released in September, Senator Tom Cotton said, “This comprehensive repeal of China’s PNTR status and reform of the U.S.-China trade relationship will protect American workers, enhance our national security and end the Chinese Communists’ leverage over our economy.”

In a statement released when the Moolenaar bill was introduced, Michael Stumo, CEO of the advocacy organization Coalition for a Prosperous America, said, “Strengthening America’s domestic industrial capacity is paramount to growing the economy, creating good-paying jobs and safeguarding our nation’s future. ... Congress’s focus on revoking China’s [PNTR] status is a necessary step to ensure America’s prosperity and independence.”

On the other side of the argument, many economists and trade advocacy organizations say that huge spikes in tariffs on Chinese goods would be economically disastrous for the U.S.

Marcus Noland, executive vice president and director of studies at the Peterson Institute for International Economics, told VOA that when he and his colleagues modeled the results of PNTR revocation, the findings were precisely the reverse of what the policy’s advocates expect. They found slower economic growth, higher prices and a negative impact on manufacturing.

“Taking away Permanent Normal Trade Relation status from China does the opposite of what the proponents would like,” Noland said. “It actually does not contribute to an industrial revival in the United States. Just the opposite. What happens is that by raising the tariffs on China … you make industrial inputs into the United States much more expensive.

“And so, the United States becomes a high-cost location of production for many manufacturers, and loses competitiveness in that sector,” he said.

Over time, economic growth and manufacturing levels would begin to rise again, and price increases would fall somewhat, but they never return to the same long-term trajectory, the findings showed.

“You do permanent damage,” Noland said.

The U.S. China Business Council, or USCBC, which works to deepen trading ties between the world’s two largest economies, also opposes the plan.

“[R]evoking Permanent Normal Trade Relations status for China would significantly harm the U.S. economy, consumers and businesses by driving up prices, eliminating hundreds of thousands of jobs, and making it harder for American companies to compete globally,” USCBC President Craig Allen said in a statement emailed to VOA.

“Any policy impacting the U.S.-China relationship should be targeted to achieve specific objectives, address unfair Chinese market practices, and be coordinated with U.S. allies and partners, rather than create a unilateral framework that accomplishes none of these goals,” Allen added.