On Monday, the Biden administration announced a last-minute trade investigation targeting Chinese-made “legacy” semiconductors, which could lead to additional U.S. tariffs on chips from China used in everyday products like automobiles, washing machines, and telecom equipment. The “Section 301” investigation, initiated just four weeks before President-elect Donald Trump takes office on January 20, will be passed on to his administration for completion, according to Biden administration officials.
The move escalates pressure on Beijing, which the United States says is trying to dominate a key technology industry – semiconductors – through unfair policies and subsidies. The Obama administration had sought to protect cutting-edge chips aimed at artificial intelligence, which can help companies compete globally and support the economy’s nascent digital revolution. However, that policy was limited because most chips entered the United States embedded inside finished products, such as cars or medical devices. The new investigation, led by the Office of the United States Trade Representative (USTR), will focus on Chinese targeting of legacy chip production for dominance and the economic impact.
Officials say the USTR has determined that China’s actions are causing “significant injury to the domestic US semiconductor industry” and creating burdens on American commerce. They also say China’s actions threaten the United States’ national security by allowing China to gain dominance in an industry critical to global supply chains and national defense.
The Section 301 inquiry is one of two broad trade laws the Obama administration uses to address unfair practices. The other, Section 232 of the Trade Expansion Act, focuses on threats to national security and is overseen by the Commerce Department. The White House said the Section 301 inquiry would examine whether China’s policies and practices, including industrial targeting of the chip sector, threaten the competitiveness of the US semiconductor industry.
It will also consider China’s targeting of silicon carbide substrates and wafers used in chip fabrication. The official said the investigation would begin accepting public comments on Jan. 6, and a public hearing was planned for March 11-12. The inquiry will not be completed before Trump takes office because it must be conducted within a year from its initiation.
Biden’s move to launch the Section 301 inquiry is part of his effort to make sure the administration has tools to respond quickly and effectively to threats. The administration also is seeking Congressional approval to use Section 232 to impose tariffs on steel and aluminum imports from China. However, opening the Section 301 inquiry could give Congress more time to debate and vote on such measures.
