Several U.S. senators have introduced a bill aiming to terminate all “Permanent Normal Trade Relations” (PNTR) with China. They also plan to gradually impose tariffs on Chinese products over a five-year period, including imposing a 100% tariff on key goods that may impact national security.
The bill, led by Senator Tom Cotton, with Senators Marco Rubio and Josh Hawley as co-sponsors, aims to revoke China’s PNTR status and increase tariffs by 100% on imported goods deemed to have “strategic significance for national security” by the Biden administration, promoting domestic market growth for related products.
For non-strategic Chinese goods, the bill proposes a minimum 35% tariff increase.
The bill also seeks to eliminate small package tariff exemptions, considered a significant “trade loophole” that has been abused by Chinese e-commerce and drug traffickers.
It stipulates that the revenue generated from increased tariffs must be used to compensate farmers and manufacturers harmed by retaliatory actions from the Chinese Communist Party, purchase critical ammunition for potential conflicts in the Pacific, and repay debts.
Cotton stated, “Abolishing China’s PNTR status and reforming U.S.-China trade relations comprehensively will protect American workers, strengthen our national security, and end the influence of the CCP on our economy.”
Rubio remarked, “Granting the CCP the same trading benefits as our greatest allies is one of the most disastrous decisions in our country’s history.”
PNTR, previously known as Most Favored Nation status, was granted to China by the U.S. in 2000, paving the way for China’s accession to the World Trade Organization (WTO) the following year.
Granting PNTR to China fundamentally altered U.S.-China trade relations. The price advantage of Chinese goods attracted American consumers. From 2001 to 2021, the value of goods imported from China to the U.S. doubled, reaching $500 billion.
The bill notes, “Since the People’s Republic of China (PRC) joined the WTO, the U.S. has lost tens of thousands of factories, millions of manufacturing jobs, and hundreds of billions of dollars in intellectual property. Currently, the U.S. bears an annual trade deficit of over $100 billion, mostly due to China’s predatory trade practices.”
Hawley underscored, “Over two decades ago, Washington elites granted China Most Favored Nation trade status, enabling Beijing to exploit our working class. Congress must revoke this sweetheart deal to shield American workers from harm by our biggest adversary and reclaim millions of overseas manufacturing jobs.”
This legislation aligns with one of Trump’s primary missions. During this month’s presidential debate, Trump reiterated his plan to impose a 60% tariff on Chinese goods if elected, along with a 10% baseline tariff on all imports.
During Trump’s tenure, the U.S. imposed tariffs on around $300 billion worth of Chinese products. Biden maintained these measures and increased tariffs on about $15 billion worth of Chinese imports. As of September 27, the U.S. doubled tariffs on Chinese-made electric cars, added a 50% tariff on solar cells, and imposed a 25% tariff on electric vehicle batteries, critical minerals, steel, aluminum, masks, and port cranes.
It is widely expected that China will impose tariffs on U.S.-made goods in retaliation.
On Thursday, Rubio and Republican Congressman John Moolenaar simultaneously introduced the “Patriotic Investment Act,” calling for the elimination of preferential capital gains tax treatment for Americans investing in China.
Capital gains tax is levied by the U.S. government on the price difference of assets bought and sold. Under U.S. federal tax law, the taxation rate for capital gains is lower than that for regular income.
Rubio stated in a release, “Many Wall Street financial firms opt to invest in communist China, funneling hundreds of billions of dollars to sustain the CCP’s military, reliant on forced labor, and flouting trade rules to disrupt American companies and job creators.”
The bill mandates that investment gains made by Americans in China will no longer receive preferential capital gains tax treatment but must be taxed at the highest income tax rate, which will encourage investors to withdraw from the Chinese securities market.
If passed, companies and individuals will have six months to withdraw investments and can spread out tax payments over three years.
Moolenaar stated, “For too long, Americans investing in Chinese military enterprises have unfairly received tax breaks, enabling them to profit by funding our adversaries.”
He remarked, “This is wrong, and Senator Rubio and I will introduce this legislation to end this special treatment. Our country’s tax laws should incentivize investment in America, not collaboration with the CCP.”