On Thursday, February 26, the US International Trade Commission (USITC), under the US Department of Commerce, announced the initiation of an investigation to study the impact of “revoking China’s Permanent Normal Trade Relations treatment on the US economy” (commonly known as Most Favored Nation treatment).
According to the statement from USITC, the investigation will assess the effects of revoking the “Permanent Normal Trade Relations” treatment enjoyed by all Chinese products on the US economy, industries, and product sourcing within a six-year timeframe.
This investigation, numbered 332-609, was launched in response to a request from the House Committee on Appropriations pursuant to the appropriations law for the fiscal year 2026 related to the Department of Commerce, Justice, Science, Energy and Water Development, and Related Agencies as well as the Interior and Environment. USITC is expected to release the investigation report by August 21st.
President Trump plans to visit China at the end of March or early April. While the investigation disclosed on Thursday falls within the required legal scope, whether it will become a new topic for the US-China summit or affect bilateral relations remains to be seen.
In the year 2000, the US Congress passed a law granting China Permanent Normal Trade Relations status, removing the largest and final obstacle for China’s accession to the World Trade Organization (WTO) in 2001.
For most WTO member countries, including China, the US grants them Most Favored Nation (MFN) trade status, meaning that Chinese imports into the US enjoy the same low tariff rates (averaging around 3%-4%) as imports from other countries, rather than higher “Column 2” tariffs, which can reach up to 40%-60%.
Initially, the US hoped that granting China these trade privileges would integrate China into the global trading system and move towards marketization. However, in recent years, many US politicians who once supported China’s WTO accession believe that the goodwill gestures backfired, leading to losses in the US manufacturing sector, widening trade deficits, intellectual property theft, and have repeatedly proposed bills to revoke China’s Permanent Normal Trade Relations.
This would mean that all Chinese exports to the US would lose the low tariff advantage, leading to significantly higher tariffs (potentially jumping from the current 3.5% to over 40%, possibly stacked on top of existing Section 301 tariffs).
As a result, prices of Chinese goods exported to the US would increase, prompting supply chain restructuring and reshoring in the US, with American businesses turning to alternative sources such as Vietnam, India, Mexico, or even bringing operations back onshore to the US. However, this move could also trigger retaliation from Beijing.
It is important to note that this USITC investigation is a fact-finding mission, not an immediate decision to revoke the trade status, but rather aims to provide an objective economic impact assessment report.
Although the investigation does not lead to immediate actions, it could pave the way for future legislative or administrative decisions. Depending on whether the report shows significant negative impacts, it could slow down the momentum to revoke China’s Permanent Normal Trade Relations, or if it indicates manageable or positive outcomes (such as reducing reliance on China), it could accelerate the process.
This is seen as a significant signal of the US upgrading its trade policy towards China. If the US moves forward, it would mark the most extensive structural change in US-China trade since China’s accession to the WTO in 2001, affecting global supply chains and prices. In response, China has warned multiple times that it will take “necessary measures” if the US pushes ahead.