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U.S. May Investigate Chinese Subsidies to Domestic Companies

By Ken Schramko, IPC senior director, North American Government Relations

The Biden administration, as part of its review of the U.S. relationship with China, is considering initiating a new probe under Section 301 of the Trade Act of 1974 into subsidies paid by the Chinese government, though no announcements or actions have yet been taken. Findings of unfair subsidies could lead to additional tariffs or further trade restrictions taken against China.

The United States has long alleged that these subsidies provide an unfair advantage to Chinese companies and pointed to support provided by the Chinese government at both the national and local levels.

Any probe would likely examine the subsidies paid by the Chinese government to industries and individual companies and future action proposed by the Chinese to support their domestic industries, as well. The U.S. government would likely want to cast a wide net on such an investigation, looking at support given to Chinese state-owned enterprises (SOEs); industries like those dealing with solar panels, steel, and auto parts; companies that are taking advantage of programs that target small- and medium-sized businesses; and the sort of “anti-subsidies” that the Chinese government uses to punish companies that do not toe the government line.

The U.S. government currently suffers from a lack of data into Chinese subsidy practices and have difficulty quantifying exactly how much businesses are benefitting from them. A 301 investigation would look to answer some of these questions, as well as provide substantial data and economic impact of the Chinese subsidy program. However, this data is going to be difficult to obtain, and such an investigation could require an extensive timeline.

IPC will continue to monitor potential U.S. trade actions that could impact our members, including this potential investigation, and will provide updates as we have them.

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