The U.S. Trade Representative’s (USTR) office announced on Friday that it has launched a new tariff investigation into China’s “apparent failure” to comply with the “Phase One” trade agreement signed with President Donald Trump in 2020, which aimed to end his first-term U.S.-China trade war.
The new investigation into alleged unfair trade practices, conducted under Section 301 of the Trade Act of 1974, provides Trump with another potential mechanism to increase tariffs on Chinese imports. The USTR’s announcement comes just a day before the start of a new round of U.S.-China talks in Kuala Lumpur on Saturday, focused on rare earth export controls.
China responded strongly, saying it “firmly opposed” what it described as Washington’s “false accusations and related investigation measures,” and accused the United States of escalating both economic and other forms of pressure against Beijing.
“China has scrupulously fulfilled its obligations in the Phase One Economic and Trade Agreement,” a spokesperson for the Chinese Embassy in Washington said on X (formerly Twitter), adding that China’s actions have benefited investors from all countries, including U.S. companies.
The Phase One agreement was designed to rebalance trade between China and the United States by committing Beijing to increase purchases of U.S. agricultural and manufactured goods, energy, and services by $200 billion annually for at least two years. However, China did not meet the purchase targets, blaming the onset of the COVID-19 pandemic, which began spreading globally around the time of the agreement’s signing in January 2020.
A USTR Federal Register notice announcing the probe also stated that China appeared not to have fulfilled its commitments to reform policies related to intellectual property protections, forced technology transfers, agriculture, and financial services—issues that had been central to Trump’s initial tariffs on Chinese imports during his first term.
According to the notice, the investigation will initially focus on China’s implementation of its Phase One commitments. The USTR has invited public comments on the matter from October 31 through December 1, and will hold a public hearing on December 16 to collect additional testimony.
“The initiation of this investigation underscores the Trump Administration’s resolve to hold China to its Phase One Agreement commitments, protect American farmers, ranchers, workers, and innovators, and establish a more reciprocal trade relationship with China for the benefit of the American people,” USTR Jamieson Greer said in a statement.
The probe could also provide the Trump administration with additional legal backing to reinstate certain tariffs on Chinese imports if the U.S. Supreme Court strikes down Trump’s duties that were imposed under the International Emergency Economic Powers Act (IEEPA). The Court is scheduled to hear arguments on a challenge to those IEEPA-based tariffs—currently averaging about 30% on Chinese goods—on November 5.
