US officials weigh probe into Chinese industrial subsidies

Officials in the US are reportedly considering opening an investigation into the use of industrial subsidies by the Chinese government, in a move that has the potential to further escalate trade tensions between Washington and Beijing.

While a decision is still some time away, concerns have arisen that these discussions within the higher echelons of President Joe Biden's administration could lead the US to impose a new wave of tariffs on products from China, potentially sparking a new trade war.

The Financial Times reported that both US trade representative Katherine Tai and commerce secretary Gina Raimondo had been considering launching a probe into Chinese subsidies under section 301 of the 1974 Trade Act.

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This is the same legal framework that was used by the administration of former President Donald Trump to impose a raft of tariffs on $360 billion of Chinese goods during his tenure.

Bloomberg News was the first to report that the Biden administration was weighing up taking such a move, but both the White House and the department of commerce declined to comment.

Opening an investigation into unfair trade practices by China would not be out of step with the mood in Biden's White House. It has been well-reported that the administration has grown increasingly frustrated with Beijing's inability or unwillingness over the past few years to move away from the heavy use of industrial subsidies to prop up some of its most strategically important sectors.

The trade ceasefire deal brokered between Trump and Chinese President Xi Jinping in January 2020  included no real commitments from Beijing to change its approach on subsidies to industry, leaving the issue as a source of major economic and diplomatic strain between the two countries.

Since taking office in January, Biden has mostly left Trump's tariffs in place despite pressure from US business groups to reduce or end them to lower the cost burden for importers. Any decision to investigate China would strongly signal a move in the opposite direction.

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Biden only held his second-ever phone call as president with Xi earlier this week, as part of US efforts to reset relations after the decision was made that lower-level engagement with China was not making progress.

The White House's account of the call between the two presidents stated that Biden "underscored the United States’ enduring interest in peace, stability and prosperity in the Indo-Pacific and the world, and the two leaders discussed the responsibility of both nations to ensure competition does not veer into conflict".

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