Washington Must Fix the Bad Trade Policies Hurting American Businesses

Despite all the hardships businesses across America have faced over the last year, things are starting to look up. Just last month, President Biden signed the overwhelmingly bipartisan Ocean Shipping Reform Act into law. OSRA will empower regulators to take a closer look at anticompetitive shipping practices that have driven up costs for businesses and consumers. This bill is a much-needed win for Americans and will bring about long-term relief that is so desperately vital.

However, businesses like ours are not out of the woods yet. COVID-19, inflation, supply chain issues, global disruptions caused by the conflict in Ukraine, and a new federal tax on more than 100 chemicals are all making it harder for businesses. On top of this, chemical distributors are still dealing with additional costs imposed by tariffs that increase costs for distributors, our customers, and consumers.

Chemical distributors pay, both directly and indirectly, hundreds of millions of dollars each year in government-imposed import taxes on products that are not produced or sourced domestically. There is a direct link between tariff increases and reduced chemical sales, and this places an outsized burden on chemical distributors. We need regulators and lawmakers to examine bad trade policies that are exacerbating supply chain shortages, adversely impacting our nation’s ability to compete globally and grow the U.S. workforce.

Hundreds of chemical products are subject to the Section 301 25 percent tariff on Chinese imports. While we recognize that federal action is needed to address trade violations by China, these tariffs are having a clear impact on the economy. The United States imported $67,034,951,904 worth of subject chemicals and products on Lists 1 through 4 from China, Hong Kong, and Macau between the initiation of the first section 301 tariffs in 2018 and the end of April 2022. Based on the tariff rates in place during the period, American businesses have paid, and likely passed along to American consumers, nearly $8 billion in taxes. If the Biden administration chooses not to roll back or provide exemptions from these harmful tariffs, we estimate businesses will be subject to more than $6 billion in additional tariffs by the end of the president’s first term in 2024.

We urge the administration to take a closer look at tariffs on products either not produced domestically or produced in limited quantities and ensure American consumers, businesses, and workers can reasonably access everyday chemicals that are essential to safeguarding our nation’s health and well-being.

Congress must also address other lingering trade policy concerns. The Generalized System of Preferences (GSP) aims to reduce prices for American importers while promoting economic development globally. Unfortunately, the GSP program’s authorization expired in 2020, and GSP importers like chemical distributors now face nearly $3 million per day in new tariffs. With Congress’ failure to renew this program, the chemical distribution industry alone could face losses upwards of tens of millions of dollars per year, disproportionately harming small businesses. 

Similarly, the Miscellaneous Tariff Bill (MTB) ensured that imports without a domestic competitor could be purchased duty-free. Like the GSP, the MTB’s authorization lapsed in 2020, and if Congress fails to reauthorize the MTB, chemical distributors will continue to experience financial hardships from purchasing unnecessarily expensive chemical imports.

The administration and Congress need to act now and address these harmful trade policies that are hurting American businesses and dragging our economy down. The Office of the U.S. Trade Representative (USTR) must reopen the exclusion process for all products subject to Section 301 tariffs that are either 1) are not produced or sourced domestically, or 2) are produced in limited domestic quantities. Congress must immediately pass retroactive and long-term renewals of the GSP and MTB, ensuring chemical distributors can import the chemicals used in the goods that support Americans’ everyday life.

Eric Byer is president and CEO of the National Association of Chemical Distributors. Follow him at @EByerNACD.