Unfair Trade Practices
Unfair Trade Practices
The last three US administrations have invoked a range of trade weapons in dealing with China, resulting in a seven-year trade war between the two countries characterized by tit-for-tat tariff fluctuations that have rattled global markets, disrupted US supply chains and resulted in losses for US exporters, especially in the agricultural sector. This chaotic situation was exacerbated in 2025 when President Trump raised tariffs on China to new heights by invoking his powers under the International Emergency Economic Powers Act. This led to bilateral tariff escalations reaching triple digits on both sides before being temporarily reduced as part of a 90-day truce reached in May 2025, which was later extended until November. Given the current Trump Administration’s focus on reducing the $295.4 billion US trade-in-goods deficit with China and reshoring US manufacturing—formidable goals with global implications—this dispute will likely be reignited again and again.
While US-China trade tensions have existed for some time, they escalated during the first Trump Administration when USTR imposed tariffs on Chinese imports under several trade remedy measures, including Section 301(b) of the Trade Act of 1974, as amended (Section 301 or 301), which gives the United States Trade Representative the authority to investigate and take action to enforce trade agreements and address certain foreign trade practices that are “unjustifiable, unreasonable or discriminatory and burden or restrict United States commerce.”
In 2018, in a self-initiated Section 301 investigation, first Trump Administration determined that a range of Chinese acts and policies violated Section 301, including foreign ownership restrictions that force technology transfer; regulations that force the licensing of technologies by US firms on non-market-based terms; state-sponsored facilitation of acquisitions of US companies with cutting-edge technology by Chinese entities; and support of cyber theft of U.S. companies to access sensitive commercial information and trade secrets. USTR increased tariffs on imports of Chinese-origin goods in several tranches, amounting to a total exceeding $580 billion. China responded to each tranche with its own tariffs on imports of US products. China also filed a WTO dispute in 2018 and, in 2020, the WTO found that the US imposition of additional tariffs under Section 301 was a violation of US commitments under the WTO agreement. The United States has appealed this finding. The Biden Administration kept in place many of the Trump Administration’s Section 301 China tariffs and expanded the list of covered products as a result of its mandatory four-year review of the China Section 301 proceeding.
In 2025, the second Trump Administration imposed new Section 301 trade remedies against China in a proceeding addressing China’s practices in the maritime, logistics and shipbuilding sectors. The action was filed by several US labor unions during the Biden Administration. In its January 2025 report, issued four days before President Trump’s inauguration, USTR accused China of a three-decade long targeting of the maritime, logistics and shipbuilding sectors for global dominance during which it “employed increasingly aggressive and specific [market-share] targets that necessitate substitution by Chinese companies at the expense of foreign competitors.” USTR described “top-down industrial planning and targeting” as a “critical feature of China’s state-led, non-market economic system: and found “China’s targeting displaces foreign firms, deprives market-oriented businesses and their workers of commercial opportunities, and lessens competition, and creates dependencies on China, increasing risk and reducing supply chain resilience.” USTR found in its report that China had to a great extent already reached many of its goals in these sectors, taking “market share with dramatic effect:: raising China’s shipbuilding market share from less than 5 percent of global tonnage in 1999, to over 50 percent in 2023; increasing China’s ownership of the commercial world fleet to over 19 percent as of January 2024; and controlling production of 95 percent of shipping containers and 86 percent of the world’s supply of intermodal chassis, among other components and products.” After hearings and public comment, USTR announced phased-in fees at US ports, phased-in additional service fees, as well as other requirements and additional duties on ship-to-shore cranes and on containers and certain other cargo handling equipment of China. Domestic concerns with this action include the insufficient capacity of US ships to offset any significant decrease in availability, price and cost increases, as well as potential retaliation against US companies.
Process
Any interested person may file a petition, which USTR will review within 45 days and publish a determination on whether to initiate an investigation. USTR can also self-initiate an investigation. If an investigation is initiated, USTR will publish a summary of the petition and provide the opportunity for the presentation of views on the issues, which should include a public hearing.
Once initiated, USTR must request consultations with the relevant foreign government on the issues being investigated.
If consultations do not lead to a resolution, USTR must determine whether US rights under a trade agreement are being denied; an act, policy or practice violates, or is inconsistent with, the provision of, or otherwise denies benefits to the United States under, any trade agreement; or, an act, policy or practice is unjustifiable and burdens or restricts US commerce; or, an act, policy or practice is unreasonable or discriminatory and burdens or restricts US commerce. If an act, policy or practice falls under the first two categories, action is mandatory; if it falls under the third category, action is discretionary depending on a number of factors.
The entire process takes about a year, unless it involves a trade agreement under which dispute settlement is required.
After a Section 301 trade remedy has been in place for four years, the US Trade Representative must either terminate the trade relief or conduct a review of the matter if requested to do so by the relevant domestic industries. The statute requires that USTR review the effectiveness of the relief, other actions that could be taken to provide relief and the effects of such actions on the US economy, including consumers.
Remedy
USTR has a broad range of remedy options at its disposal to eliminate or compensate for the conduct in question, including the suspension or termination of trade concessions; duties or other import restrictions and binding agreements to eliminate the act, policy or practice, or provide compensatory benefits.
World Trade Organization Rules on Dispute Settlement
The strengthening of the dispute settlement process for international trade disagreements is one of the most significant accomplishments of the Uruguay Round negotiations. Under the Dispute Settlement Understanding (DSU) that applies to covered WTO agreements, members have agreed to settle disputes relating to those agreements according to the rules of the WTO and in proceedings before the WTO Dispute Settlement Body. Under the DSU, members should not be unilaterally deciding that violations of WTO obligations have occurred. The DSU includes fairly detailed procedures for bringing disputes to the WTO, including timelines, evidentiary rules, consultation requirements and the type of countermeasures that may be applied when violations of a WTO agreement are found.
