A special committee of the United States Congress released a comprehensive annual report on Tuesday (November 19), recommending for the first time that legislators end China’s preferential trade status and terminate the provision allowing duty-free entry of small packages valued at less than $800 into the United States, as well as prevent the Chinese Communist Party from obtaining dual-use military and civilian technology.
The U.S.-China Economic and Security Review Commission, established by Congress as a bipartisan body responsible for investigating China and providing policy recommendations, is behind these suggestions, as reported by Fox News. The commission is now advocating for Congress to end China’s Permanent Normal Trade Relations (PNTR) status that has been in place since 2004.
On Tuesday, the commission presented 83 policy recommendations to lawmakers, focusing on China’s military capabilities, threats to U.S. allies in the region, and how China manipulates U.S. policies to serve its own interests.
Chairman Robin Cleveland of the commission stated, “For decades, we have engaged in a game of whack-a-mole within international organizations and guidelines to counter China’s (CCP) growing efforts – either circumventing the law or exploiting trade loopholes.”
Cleveland emphasized that while existing government powers can hinder concerning Chinese-made products from inundating the market, legislative actions are strongly recommended to enhance safety and legal protections for consumers and manufacturers.
With Republicans controlling both the House of Representatives and the Senate, the prospect of ending Permanent Normal Trade Relations is increasingly likely. This policy granted China trade benefits equivalent to those of U.S. allies in the 2000s, facilitating the influx of cheap Chinese goods into the American market.
Terminating Permanent Normal Trade Relations would grant the president the authority to assess and review the need for higher tariffs. President-elect Trump has vowed to significantly increase tariffs on Chinese-manufactured goods.
The report reveals that an increasing number of Chinese goods are taking advantage of exemptions under the tariff law’s “De minimis” rule, evading regulatory inspections and tariffs by entering as “small parcels” valued under $800.
The United States has seen approximately $4 million worth of Chinese goods exempted from import tariffs daily this year through the “De minimis” rule, up from $3 million last year.
Revoking the exemption of the “De minimis” rule for e-commerce shipping would necessitate stricter monitoring of small-value commodities by Customs and Border Protection, prompting Congress to request more resources. The report notes that these goods are often used to smuggle fentanyl into the U.S.
According to the report, Congress should also consider legislation to revoke federal tax subsidies for investments in Chinese companies listed on the Commerce Department’s trade blacklist, known as the Entity List.
This legislation could eliminate preferential capital gains tax rates, interest “loopholes,” or capital loss carryover provisions for companies believed to conflict with U.S. interests or engage in intellectual property theft.
The report further suggests enhancing export controls to prevent China from acquiring critical dual-use military and civilian goods and technologies, as well as banning the import of certain technologies controlled by Chinese entities, such as autonomous humanoid robots and energy infrastructure products.
The report urges Congress to direct the establishment of an office for foreign investment oversight to monitor funds flowing into targeted countries and to amend laws to allow the Consumer Product Safety Commission to enforce mandatory recalls of Chinese products.
President Trump is actively working to fill his cabinet, including selecting hawkish candidates on China. During his campaign this year, Trump proposed imposing a 10% tariff on all U.S. imports and a 60% tariff on Chinese-made products.
According to Zhu Baoliang, former chief economist of the Chinese economic planning agency, speaking at a Citigroup meeting, if Trump successfully raises tariffs to 60%, China’s exports could decline by $200 billion, resulting in a one-percentage-point drag on GDP.
Last year, China’s exports to the U.S. were around $500 billion, accounting for approximately 15% of all its exports.