Washington, D.C. – U.S. Trade Representative (USTR), Katherine Tai, announced today her decision to initiate an investigation under Section 301 of the Trade Act of 1974 on China’s Acts, Policies, and Practices Related to Targeting of the Semiconductor Industry for Dominance. The probe will focus on China’s manufacturing of foundational semiconductors (also known as legacy or mature node semiconductors), including to the extent that they are incorporated as components into downstream products for critical industries like defense, automotive, medical devices, aerospace, telecommunications, and power generation and the electrical grid. In response, the American Economic Liberties Project released the following statement.

“The historic CHIPS Act investment in the U.S. semiconductor industry pales in comparison to the decades of market-distorting support the Chinese government has provided to the industry, often in violation of World Trade Organization rules,” said Daniel Rangel, Rethink Trade’s Research Director. “The success of CHIPS investments depends on reversing the consolidation trends the semiconductor industry has experienced over the past three decades, both at the firm and national levels. This investigation is a step in the right direction.”

In February 2024, Economic Liberties released the report, Reshoring and Restoring: CHIPS Implementation for a Competitive Semiconductor Industry, regarding domestic and international competition problems in the semiconductor industry and how the implementation of the 2022 CHIPS and Science Act might be able to overcome them. The report recommends increasing most-favored nation tariff rates on end-use chip products to address China’s plans for mature-node dominance. Rangel participated in the May 2024 Supply Chains Resilience hearing organized by USTR and insisted on the importance of matching Congress’s industrial policy efforts with bold action on the trade policy front by increasing most-favored nation tariffs on certain electronic devices and revising rules of origin in existing trade agreements to increase the regional value content required for electronic goods to gain preferential access to the U.S. market.

Learn more about Rethink Trade here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.