The Trump administration plans to launch a trade investigation into China's failure to comply with the terms of a trade deal signed during President Trump's first term, according to two people familiar with the investigation.
The move could lead to higher tariffs and risk increasing tensions between the United States and China. It would follow weeks of tense relations between the world's two largest economies and could be an attempt by the United States to gain influence ahead of a meeting next week between Mr. Trump and Xi Jinping, China's leader.
The investigation, which could be announced as early as Friday, would be filed by the Office of the U.S. Trade Representative under Section 301 of the Trade Act of 1974. This section allows the government to investigate whether other countries' trade practices are harming the United States.
The investigation could pave the way for further tariffs on Chinese imports, but no decision has been made yet. In the past, such investigations have taken months. Data released in 2022 showed that China had fallen far short of its commitments to purchase American aircraft, soybeans, energy, services and other products.
A spokeswoman for the Office of the U.S. Trade Representative declined to comment.
The decision to launch the case just days before high-level meetings between the United States and China underscores the economic risks of a trade war that has ravaged both countries and could have devastating consequences for businesses on both sides.
Since returning to the White House, Mr. Trump has imposed a 55 percent tariff on Chinese imports. Due to tariffs imposed by the president during his first term, tariffs on some goods are much higher. The Chinese government responded with tariffs on American products, including soybeans, resulting in lost business for U.S. farmers.
Since then, China has upped the ante, introducing a comprehensive system to control global trade in products containing even small amounts of Chinese-made rare earth metals. Mr. Trump responded by threatening an additional 100 percent tariff on Chinese products starting Nov. 1, as well as export restrictions on American software.
Mr. Trump and Mr. Xi are scheduled to speak in person next Thursday on the sidelines of an international meeting in South Korea, where analysts say the leaders could try to stabilize the relationship. On Wednesday, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer flew to Malaysia for talks with China's Vice Premier He Lifeng. Those talks were expected to set the table for the meeting between Mr. Trump and Mr. Xi.
Mr. Greer said on CNBC on Wednesday that he and Mr. Bessent would meet with the Chinese “to see if there is room to move forward on some of these really difficult questions that have arisen because of some new Chinese actions on rare earths.” He called these measures “incredibly aggressive” and “completely disproportionate” compared to any measures the United States or its allies have taken against China.
The trade case could also provide the Trump administration with a way to continue pressuring Beijing in the coming months if the Supreme Court overturns other tariffs the president has imposed on China. The Supreme Court will hear arguments next month in a case challenging tariffs that Mr. Trump imposed under a national emergency law, including many on Chinese imports. This litigation would have no impact on tariffs enacted under Section 301.
It remains to be seen whether the new trade case will prove to be a means of applying pressure against Beijing or will further strain trade relations. The Trump administration has repeatedly complained that China is not complying with the terms of a trade deal signed in 2020, which followed months of negotiations and high tariffs that the United States and China imposed on each other's products.
In the deal, Chinese officials committed to buying $200 billion more in American goods and services, including natural gas, soybeans and aircraft. Among other things, they also agreed to open markets to American companies and better protect American technology and trade secrets.
But after the agreement was signed, there was an outbreak of the Covid-19 pandemic and trade collapsed. An analysis showed that China was far from meeting its obligations. The Peterson Institute for International Economics calculated that China ended up buying only 58 percent of the American exports it had committed to buying, not even enough to reach pre-trade war import levels.
Michael Wessel, a former commissioner of the U.S.-China Economic & Security Review Commission, called China's impact on American producers and workers “devastating.” He said that “promises made in the past have not been kept and China must be held accountable.”
The Trump administration accuses the Biden administration of failing to hold China to the terms of the agreement. But many analysts said the targets were unrealistic in the first place.
“China has never been able to meet its purchasing commitments,” wrote Chad Bown, a senior scientist at the Peterson Institute who conducted the analysis and later served as an official under the Biden administration.
Some analysts have questioned how far the Trump administration can go with even higher taxes, with so many tariff threats already on the table.
Greta Peisch, a lawyer at Wiley Rein and a former U.S. trade official, said the U.S. trade case will shine a spotlight on China's recent purchases of soybeans and other agricultural products, which made up much of its first-term purchasing commitments.
But she pointed out a certain irony: The Chinese said their falling soybean purchases were due to Mr. Trump's tariffs, which prompted China to respond with its own levies on U.S. soybeans and other products.
“Because the decline in purchases was partly a result of tariff increases, it is not clear whether the threat of higher tariffs will solve this problem,” Ms. Peisch said.