New Report Provides Blueprint for Rescinding China’s Trade Status

As tensions between the United States and China continue to escalate, American policymakers face critical decisions about how to disentangle the world’s largest economies without causing economic upheaval. Breaking from China is conceptually simple, but logistically complex. A new American Compass report offers policymakers a detailed roadmap for rescinding China’s Permanent Normal Trade Relations (PNTR) status and implementing a new tariff structure to reduce U.S. dependence on Chinese imports.

The report, by Mark DiPlacido, Trevor Jones, and Chris Griswold, explains how the consensus on U.S. trade with China has shifted dramatically since it received PNTR over two decades ago. China has not abided by its World Trade Organization (WTO) commitments or basic principles of openness and reciprocity. Instead, it has pursued an aggressive mercantilist trade policy designed to dominate strategically important global markets. This has resulted in American offshoring, deindustrialization, and supply chain dependence on a hostile adversary.

Free trade has not resulted in a liberalized, democratic China as many policymakers hoped. Rather, it has enabled China to become a near-peer competitor that now threatens U.S. economic and national security interests. By rescinding PNTR and implementing a new tariff structure, the United States can begin to reverse these trends and reduce its vulnerabilities.

This will require creating and placing China under a new, third column in the Harmonized Tariff Schedule (HTS), which governs the tariff rates and duties applied to foreign goods that enter the U.S. market.

The report’s key recommendations include:

1. Imposing a 25% tariff rate on non-strategic goods and a 100% tariff rate on strategic goods from China;
2. Phasing in the new tariffs over five years with no exceptions and closing the de minimis loophole; and
3. Countering China’s tariff evasion strategies.

The full report, including appendices to help guide policymakers in setting tariff rates, is available here.