A bipartisan committee in the House is recommending that the United States reset its economic relationship with China and raise tariffs on the country.
The House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, led by Chairman Mike Gallagher (R-WI) and ranking member Raja Krishnamoorthi (D-IL), released the recommendations on Tuesday in a 53-page report.
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The report contends that since it joined the World Trade Organization in 2001, Beijing has conducted a “multidecade campaign of economic aggression against the United States and its allies in the name of strategically decoupling the People’s Republic of China.”
The lawmakers’ recommendations fall into three categories: resetting America's economic relationship with China, stemming the flow of U.S. capital and technology into China, and building U.S. economic and technological resilience in coordination with allies. The report includes nearly 150 recommendations for Congress on legislation, offering a blueprint for navigating the country’s complicated relationship with China.
“Collectively, these recommendations will reset the terms of our relationship with the PRC, prevent the flow of American capital and technology from supporting its military advances and human rights abuses, and build collective economic resilience in concert with our allies and partners while ensuring American leadership for decades to come,” Gallagher and Krishnamoorthi said in a statement.
Notably, the committee recommends moving China to a new tariff column. After China joined the WTO, the U.S. offered Beijing favorable tariff rates in order to spur trade, but the committee argues that, given the state of play, Congress should levy stronger tariffs against China.
Technological competition features heavily in the report. For instance, the committee recommends the imposition of tariffs on foundational (or legacy) semiconductor chips that are used in products such as phones and cars. The committee argues that Chinese domination in the legacy semiconductor space could give Beijing “excessive leverage over the modern global economy.”
Former President Donald Trump has pushed for more stringent tariffs against China, and his former trade representative, Robert Lighthizer, praised the committee’s recommendation for moving China into a different tariff column. He called the committee’s endorsement a “historic event.”
“The failed policy of the past cost millions of American workers their jobs and the country trillions of dollars of wealth,” Lighthizer said Tuesday. “It crippled many communities and put our national security at risk. I hope the committees of jurisdiction act quickly to implement these findings and set America on a course of greater prosperity and security for all working families.”
The committee also asked Congress to direct the White House to prepare joint plans with the U.S. and its allies to exact “severe diplomatic and economic costs” on China should it engage in military action against Taiwan or other U.S. partners.
The report outlines a plan to have large publicly traded U.S. companies disclose more information about their financial ties to China. It urges Congress to mandate that such companies disclose details about their “material ties” to Beijing and disclose key risks related to China.
Additionally, it calls for disclosures related to a company’s preparation for and ability to withstand the sudden cessation of market access that might result from a conflict in the region.
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The committee is pushing for legislation to ensure that capital gains and dividends earned from investments in China are not taxed at a lower level than the salaries of U.S. workers. It argues the U.S. should allow investors a one-year period to divest from Chinese entities and then tax investments in China at a rate on par with ordinary income.
“The economic and national security threat from the Chinese Communist Party is very real,” Chris Iacovella, the president and CEO of the American Securities Association, said. “Congress must protect American investors and the integrity of U.S. capital markets by adopting the policies in today’s report from the Select Committee.”