US Trade Panel Investigates Impact of Revoking China's Trade Status

The U.S. International Trade Commission (USITC) announced on Thursday that it would undertake an investigation into the potential economic repercussions of revoking China's Permanent Normal Trade Relations (PNTR) status over a six-year timeframe. This action is expected to result in heightened tariffs on imports from China, raising concerns about trade dynamics between the two nations.

Chinese analysts have voiced skepticism regarding the feasibility of this U.S. initiative, arguing that the negative economic consequences for the United States, coupled with complex legal hurdles and existing political rifts, make it unlikely to succeed. They further caution that this move could be a violation of World Trade Organization (WTO) regulations and detrimental to both U.S.-China relations and the broader global economic framework.

The USITC, which is responsible for investigating trade competitiveness and adjudicating anti-dumping and anti-subsidy cases, indicated it would share the findings of its investigation, as compelled by a congressional appropriations bill, by August 21. The Commission will also explore a scenario in which Congress withdraws China's PNTR status, potentially leading to a phased implementation of specific tariffs over five years on key goods.

PNTR status, which effectively grants China Most Favored Nation (MFN) treatment permanently, has significantly shaped U.S.-China economic and trade relations for the past two decades. However, since taking office in January 2025, President Donald Trump has instructed trade and commerce officials to evaluate legislative measures aimed at potentially rescinding this status.

In response to these developments, Chinese experts urge no alarm over the U.S. actions, labeling them as attempts by certain U.S. politicians to leverage concessions in the ongoing competition with China. Bao Jianyun, an expert from Renmin University, characterized the latest push as part of a series of efforts to hinder China's growth.

Past attempts to modify China's PNTR status have repeatedly faltered due to significant factors, including potential economic repercussions, complicated legislative processes, and internal divisions among U.S. policymakers. Huo Jianguo, a vice chairman of the China Society for World Trade Organization Studies, noted that despite various proposals, none have successfully materialized into law.

The potential fallout from revoking China's PNTR status could entail a short-term decline in the real GDP of the United States, particularly if China retaliates with reciprocal tariff increases on American imports. Such actions would negatively impact U.S. agricultural production and manufacturing output, which is heavily reliant on Chinese intermediate goods, as highlighted in a Peterson Institute for International Economics report.

Critics of the U.S. move argue that it exemplifies a unilateral and protectionist approach to trade that contravenes WTO guidelines, consequently threatening the framework of international economic relations. This sentiment was echoed by Huo, who underscored the detrimental implications of such a policy.

According to a white paper issued by the State Council Information Office of China, WTO regulations mandate that all member countries grant MFN treatment unconditionally, a stipulation that bears binding legal authority. The implications of a U.S. withdrawal from this agreement could be significant, not only for bilateral relations but for the global marketplace.

The speculation surrounding the U.S. investigation may also serve as a strategic maneuver to secure negotiating leverage in upcoming diplomatic discussions, especially given that China's resilience against external pressures appears to be strengthening. Bao noted that advancements in trade diversification have bolstered China's position.

In light of the ongoing tension, U.S. Trade Representative Jamieson Greer affirmed in a recent television interview that the administration is consistently re-evaluating its trade policies to better align them with national interests, asserting a commitment to adhere to existing agreements with China.