HOUSE WAYS & MEANS COMMITTEE TRADE SUBCOMMITTEE HEARING
Overview
For questions on the note below, please contact the Delta Strategy Group team.
On February 25, the House Committee on Ways and Means Subcommittee on Trade held a hearing on American Trade Enforcement Priorities. Witnesses in the hearing were:
- Ambassador Gregg Doud, President and CEO, National Milk Producers Federation
- Ambassador Jeffrey Gerrish, Partner, Schagrin Associates
- Jonathan McHale, Vice President, Computer and Communications Industry Association
- Kevin Rosenbaum, Executive Director, International Intellectual Property Alliance
- Greta Peisch, Partner, Wiley Rein LLP
Below is a summary of the hearing prepared by Delta Strategy Group. It includes several high-level takeaways, followed by summaries of opening statements as well as witness testimonies and a summary of the Q&A portion of the hearing.
Key Takeaways
The following is a summary of the main topics explored in the hearing, with further details in the Discussion section below.
- There were bipartisan concerns raised, led by Committee Chair Smith (R-MO) and Ranking Member Sanchez (D-CA), about China’s exploitation of the de minimis exemption, with Smith (R-MO) highlighting China’s surge in de minimis shipments as evidence of tariff evasion and questioning whether restrictions should be tightened under this Trump Administration. Gerrish discussed why reforming de minimis is urgent to prevent China from undermining trade enforcement, disadvantaging U.S. manufacturers, and facilitating illicit or subsidized imports.
- Representatives and witnesses referenced the Leveling the Playing Field 2.0 Act, alongside targeted tariffs against Chinese-owned and controlled companies, as the next step in countering China’s efforts to evade trade remedies by shifting production and subsidizing producers in third countries. They called for a wider range and strength of enforcement measures, paired with trade partner accountability and a rules-based approach for restoring strong U.S. leadership in trade enforcement and a level playing field. Witnesses noted that while current trade measures tools help counter unfair trade practices, gaps remain, particularly in addressing circumvention tactics such as transshipment, misclassification, and undervaluation of goods.
- Representatives emphasized the need to address transshipments and cross-border subsidies, with Gerrish citing legislative efforts such as the Fighting Trade Cheats Act. The discussion highlighted how trade circumvention floods the U.S. market with subsidized and unfairly priced products, particularly with China’s exploitative practices, in analyzing the trade measures to prevent and combat offenses, with a focus on identifying repeat offenders.
- Representatives, led by Subcommittee Chairman Smith (R-NE), questioned witnesses on best practices for strong trade agreements and enforcement measures in reviewing the U.S. Mexico-Canada Agreement’s (USMCA) sunset next year. Representative LaHood emphasized that digital trade is no longer a niche sector but a key pillar of economic strength and global influence, highlighting the digital trade chapters of the USMCA as a gold standard for setting requirements, standards, and regulations in this area.
- There was bipartisan consensus, led by witness Gerrish and Doud, on the need to open new and expand current markets for agricultural producers and U.S. manufacturers through strong trade policy and enforcement. Peisch noted that while long-term tariffs may be necessary to counter China’s entrepreneurial practices, imposing tariffs without a strategy for removing trade barriers identified in the U.S. Trade Representative’s (USTR) annual report will not help U.S. industries expand into new markets.
Opening Statements & Testimony
Subcommittee Chairman Adrian Smith (R-NE)
For too long, American businesses have faced an unlevel playing field due to the previous Administration’s failure to take necessary enforcement actions. The renewed focus on trade enforcement, alongside a process to incorporate Congressional and stakeholder input, is a critical opportunity to advance U.S. trade priorities. Effective enforcement requires utilizing all available tools to ensure fair treatment for American products, including mechanisms within U.S. trade agreements. The Biden Administration inherited two major agreements, the USMCA and the Phase One Agreement with China yet failed to enforce them effectively. China did not fulfill structural or purchase commitments for U.S. agricultural products and faced no consequences. Under USMCA, American energy and mining companies experienced discriminatory treatment in Mexico, with some cases amounting to expropriation. Delays in enforcement undermine market certainty and embolden trade partners to adopt unfair practices. When Mexico signaled its intention to restrict U.S. biotech corn exports, the Biden Administration’s slow response allowed the dispute to drag on for years when immediate action could have prevented the policy. Weak enforcement erodes U.S. credibility in trade agreements and encourages further violations. In contrast, the first Trump Administration took decisive action, including Section 301 tariffs.
Subcommittee Ranking Member Linda Sanchez (D-CA)
This Administration’s trade policy approach appears to revolve around threats, excessive tariffs, and a relentless pursuit of revenue to fund tax cuts for the wealthy. Tariffs should not be used as a blunt instrument for every foreign policy dispute. They are an important tool in trade policy to help level the playing field for domestic industries, but they cannot serve as our sole strategy. If the Administration truly cares about workers displaced by trade, where is the funding for Trade Adjustment Assistance? The President talks tough on enforcement, but rhetoric alone is not enough; it requires funding and a functional government. The America First Trade Policy memo called for enforcement reviews due April 1st to guide future actions, yet the President preempted his own process by immediately threatening tariffs on Canada, Mexico, and Colombia. These economic coercion tactics have not addressed trade violations but rather served to advance his anti-immigrant agenda. Trump imposed only a ten percent tariff on China, far from the sixty percent he promised, and walked back his pledge to close the de minimis loophole. U.S. trade policy needs serious reform and for too long, we assumed a rising tide would lift all boats, but too many American workers and industries have been left behind. China has fundamentally altered the global trading system, and many of our policies have failed to protect U.S. interests. This Committee cannot remain passive while the executive branch disregards constitutional limits and raises costs for Americans, with a renewed effort to craft responsible trade policies and restore Congressional authority in shaping U.S. economic strategy.
Ambassador Gregg Doud, President and CEO, National Milk Producers Federation
In 2023, U.S. producers exported billions in goods, a success largely driven by existing U.S. trade agreements, which have significantly expanded market access over the past two decades. The U.S. maintains a trade surplus with each of its bilateral trade partners, despite facing significant competitive disadvantages. While the EU and other nations have aggressively secured trade deals with key importing countries, the U.S. has not kept pace. Beyond securing greater market access, trade enforcement is critical. Failure to uphold agreements has real-world consequences, restricting opportunities for American exporters. North America remains the most significant region for U.S. trade, with a substantial portion of exports going to Canada and Mexico. While Mexico has been a strong partner, Canada has repeatedly undermined market access commitments under the USMCA. Canada has manipulated trade policies and circumvented agreed-upon disciplines, denying U.S. industries the benefits promised in the agreement. The 2026 USMCA review presents a crucial opportunity to ensure compliance and demand meaningful reforms.
The EU represents another major challenge and a staggering trade imbalance, with the EU exporting billions in goods to the U.S., while U.S. exports to the EU remain significantly lower. Meanwhile, European regulators impose unfair restrictions that limit U.S. access, often using regulatory barriers and protectionist measures that disproportionately affect U.S. industries. These disparities not only hinder direct trade with Europe but also extend to third-party markets where the EU has negotiated similar protections. Addressing these inequities requires a fundamental reset in U.S.-EU trade relations. China remains another priority, as the Phase One Trade Agreement negotiated in 2020 provided benefits for U.S. exports, but enforcement remains essential. The U.S. must ensure China upholds its commitments by reducing tariff barriers, eliminating unfair restrictions, and facilitating market access. Without strong enforcement, these agreements risk becoming empty promises. India has long imposed barriers to U.S. exports through high tariffs and restrictive regulations. If Congress reauthorizes the Generalized System of Preferences (GSP) program, India must first meet its market access obligations before regaining GSP benefits. The U.S. must ensure that preferential trade terms are conditioned on fair treatment of American exports. The America First Trade Policy Executive Order lays the foundation for new trade agreements, with the Administration’s commitment to fair and reciprocal trade, particularly in addressing long-standing trade imbalances.
Ambassador Jeffrey Gerrish, Partner, Schagrin Associates
China has systematically employed unfair and market-distorting trade practices—including massive subsidies, forced labor, forced technology transfers, intellectual property theft, and currency manipulation—to dominate key global industries. Sectors have been severely impacted by China’s strategy of subsidizing production, creating excess capacity, and flooding global markets. A key measure by the first Trump Administration in reversing failed trade policies and correcting the imbalanced trade relationship with China was the imposition of Section 301 tariffs under the Trade Act of 1974 on Chinese imports. These tariffs have substantially improved U.S.-China trade terms, reducing the goods trade deficit with China by over 21 percent and decreasing China’s share of U.S. imports. The Administration also secured the Phase One Trade Agreement, which included binding and enforceable commitments requiring China to implement structural reforms in intellectual property, technology transfer, agriculture, financial services, and currency practices. Due to China’s lack of transparency, full compliance assessment remains difficult, and evidence suggests that China has violated multiple provisions of the agreement. As part of the America First Trade Policy Memorandum, the USTR will conduct a compliance review of the Phase One Agreement. If China is found in violation, the U.S. must use the allocated enforcement mechanisms to take immediate action, including imposing additional tariffs, but a broader, more ambitious trade enforcement strategy is needed to counter the ongoing threat China poses.
One necessary action is revoking China’s Permanent Normal Trade Relations (PNTR) status, as granting PNTR to China was a strategic mistake, and it is time for Congress to correct this error. The U.S. must strengthen its antidumping and countervailing duty laws, with the passage of the Leveling the Playing Field Act 2.0 as critical to enhancing trade remedy enforcement. This Act would allow the Department of Commerce to countervail cross-border subsidies, particularly targeting China’s Belt and Road Initiative, and streamline trade remedy investigations when Chinese companies shift production to third countries to evade duties. Another critical step is closing the de minimis loophole, which currently allows Chinese imports to bypass duties, undermining trade enforcement. Any imports subject to higher duties, including Section 301 tariffs, must be excluded from de minimis eligibility. The U.S. must expand its efforts to combat duty evasion as Chinese firms routinely engage in practices that undermine trade enforcement actions, including tariff circumvention. The Enforce and Protect Act should be applied to Section 301 and Section 232 duty evasion to close these loopholes.
Jonathan McHale, Vice President, Computer and Communications Industry Association
To sustain economic investments and ensure continued U.S. economic leadership, maintaining access to foreign markets is critical as this access is increasingly threatened by discriminatory trade policies that primarily harm U.S. businesses and the broader economy. The best response to these threats is a proactive and empowered trade policy, led by U.S. trade officials with strong Congressional backing. Their directive should be to stand up for U.S. companies and push back against egregious trade barriers that continue to expand across global markets.
Forced revenue transfers are another extractive and discriminatory policy aimed at U.S. firms, unfairly redirecting revenue from American innovators to domestic competitors under the pretense of supporting local industries. Asymmetric platform regulation is another growing challenge, with the EU’s Digital Markets Act (DMA) singling out leading U.S. tech companies with aggressive regulatory measures addressing speculative harms. While promoted as pro-competition, these laws undermine security, stifle innovation, and extract American intellectual property under the guise of consumer protection. Compliance costs U.S. firms billions of dollars while degrading user experience. Other countries are following the EU’s lead, with Japan implementing similar rules and Turkey, Korea, Australia, and Brazil considering their own versions. Data localization mandates also impose severe restrictions on U.S. companies by preventing them from offering online services across borders, increasing cybersecurity risks for both American and foreign consumers. Even when U.S. cloud computing firms invest in a foreign market, they are often barred from servicing government or critical infrastructure customers, with Fance, Korea, and Mexico as key examples of markets enforcing these restrictions. Given that other countries will continue attempting to hijack the success of U.S. firms, strong U.S. leadership is essential to counter these harmful trade practices. We need immediate engagement with key trade partners to challenge these discriminatory measures and be prepared to use forceful trade remedies, including Section 301 tariffs or domestic tax-based disincentives, as potential responses.
Kevin Rosenbaum, Executive Director, International Intellectual Property Alliance
Trade agreements also prevent market closures. Australia has repeatedly considered quotas on online content, but its U.S. FTA obligations helped prevent their implementation. Similarly, Chile has stalled attempts to expand its theatrical screen quota due to its FTA commitments. The full benefits from these agreements remain unrealized due to failures in implementation by U.S. trade partners. Canada’s Online Streaming Act imposes financial conditions on market access, contradicting USMCA commitments. In Mexico, despite a Supreme Court ruling upholding copyright reforms, the government has failed to introduce required implementing regulations. China’s failure to meet its services purchasing obligations under the Phase One trade deal and South Africa’s pending copyright reform bills, potentially violating its trade commitments under GSP and African Growth and Opportunity Act (AGOA), further illustrate these challenges. While U.S. trade agreements have driven substantial growth for copyright industries, their full potential can only be realized if U.S. trading partners fully implement their obligations.
Greta Peisch, Partner, Wiley Rein LLP
We need trade enforcement tools and resources, a comprehensive China strategy, and maintaining an across-the-board enforcement agenda. This Subcommittee has created new enforcement tools, from the Uyghur Forced Labor Prevention Act to the Rapid Response Mechanism in USMCA. The Leveling the Playing Field 2.0 Act is the next step in countering China’s efforts to evade trade remedies by shifting production and subsidizing producers in third countries. Domestic industries filed over one hundred anti-dumping and countervailing duty petitions with the Commerce Department and the International Trade Commission (ITC) in 2024, nearly double the average of the past ten years. The USTR and Customs and Border Protection (CBP) are stretched thin, and any reductions would jeopardize their work on behalf of U.S. industries and workers. China’s non-market policies and practices target key sectors like steel, aluminum, shipbuilding, solar panels, electric vehicles, semiconductors, and batteries. Every tool must be used to counter China’s distortions, including strong enforcement of trade remedies laws and Section 301. Sector-based Section 301 investigations, such as those initiated by the last Administration into China’s maritime logistics, shipbuilding, and semiconductor sectors, can lead to targeted remedies. China’s manufacturing overcapacity displaces producers worldwide, leading other countries to adopt policies that support industries struggling under China’s supply, with this distortion becoming more acute as China has focused on exporting its way to growth. Investments in the Bipartisan Infrastructure Law, CHIPS and Science Act, and Inflation Reduction Act provide critical boosts but could be even more targeted to increase U.S. resilience. Long-term tariffs may be necessary to counter China’s entrepreneurial practices, but imposing tariffs without a strategy for removing trade barriers identified in the USTR’s annual report will not help U.S. industries expand into new markets. China and Europe use standards bodies and international rulemaking to their advantage, often to the detriment of U.S. industries. The U.S. must be at the table to advocate for its interests, with an effective enforcement strategy which asserts U.S. leadership internationally. The World Trade Organization (WTO) remains an essential forum for promoting transparency, raising emerging trade issues, and coordinating solutions to global challenges, such as manufacturing overcapacity and the economic impact of climate change.
Discussion
Committee Chairman Smith (R-MO): Should de minimis exemptions be tightened to prevent tariff evasion and protect U.S. trade enforcement under this Trump Administration? What role do tariffs play in increasing revenues? Gerrish: We should eliminate de minimis eligibility for any products that come under the various trade enforcement actions that are taken, including Section 301, Section 232, and other trade enforcement measures. During the first Trump Administration, tariffs raised over $260 billion, and additional tariffs in a second Trump term could potentially generate even more. Beyond revenue, tariffs serve as a tool to address unfair trade practices, rebalance trade relationships, bolster domestic manufacturing, and enhance national security. The revenue-generating aspect of tariffs is particularly significant and is likely to grow over time.
Committee Chairman Smith (R-MO): Do you consider our agricultural trade relationship with Brazil to be fair and reciprocal? Doud: Meanwhile, the U.S. faces a $26 billion agricultural trade deficit with the EU. The EU has long used certification requirements and non-tariff trade barriers to limit U.S. agricultural imports, reinforcing a trade imbalance that has persisted for decades. I do not think our relationship with Brazil is fair or reciprocal, and they are our stiff competitor. Brazil almost has a cartel mentality in restricting flow of certain agricultural products.
Ranking Member Sanchez (D-CA): Is the Rapid Response Mechanism (RM) an effective trade tool? Peisch: The RM was an incredibly effective tool, and the last Administration demonstrated its full range and effectiveness by bringing 27 RM cases across sectors. It benefits our workers here in the U.S. because production should not be incentivized to offshore by poor working conditions abroad. This enforcement approach levels the playing field so that our workers can compete on roughly equal footing in terms of labor considerations.
Ranking Member Sanchez (D-CA): How has China’s abuse of the de minimis exemption impacted U.S. production and exports? Gerrish: China’s abuse of this exemption reduces ability to enforce trade duties and trade mechanisms, undermines our trade enforcement efforts, cutting across various duties applied to imports, and hinders the ability of U.S. manufacturers to compete. Tariffs imposed to counteract unfair trade practices are intended, in many instances, to level the playing field with our U.S. producers, putting them at a competitive disadvantage as well.
Subcommittee Chairman Smith (R-NE): Due to Colombia’s use of politically motivated countervailing duty investigations across commodities, what actions do you think the U.S. should take to push back and send a clear message to prevent other markets from making similar moves that undermine the entire process? Doud: We need to see how they ultimately decide to proceed and whether common sense will prevail in this discussion. The U.S. government has been very aggressive with our trading partners throughout the Western Hemisphere. It is critical to make clear that domestic political issues should not be solved at the expense of U.S. agricultural exports; that is exactly what is happening here.
Subcommittee Chairman Smith (R-NE): How should the Administration address shortfalls related to market access especially ag biotech products? Gerrish: China has not fulfilled its commitment to a science-based approval process to ag biotech, delaying approvals for U.S. companies, farmers, and ranchers while requiring irrelevant information. The Phase One trade agreement includes a strong enforcement mechanism to resolve disputes within approximately ninety days, with the U.S. retaining the right to take unilateral action against violations. This mechanism should be fully utilized by the current and future Administrations to enforce China’s commitments.
Subcommittee Chairman Smith (R-NE): How do you plan to proceed and approach the impending sunset of the USMCA? Doud: We need to emphasize failed USMCA obligations with regard to tariff rate quota allocations.
Representative Panetta (D-CA): How can we structure dispute resolution procedures to be faster acting? Doud: That was a big topic of conversation with Ambassador Mahoney in USMCA about how to match enforcement at the speed of commerce and not languish for years. Speed is one issue, and getting it correct is the other issue. I agree we have a gold standard enforcement mechanism now for the very first time, and we need to continue that in other agreements.
Representative Buchanan (R-FL): Why are we not more aggressive in our agreements, especially with the momentum from USMCA? Gerrish: Agreements are only as effective as the people enforcing them and the willingness to use available enforcement mechanisms. Changes to antidumping and countervailing duty laws are needed to address ongoing issues with dumping and subsidization of seasonal, imperishable goods. We can enter into trade agreements that benefit both countries, particularly U.S. farmers and ranchers by expanding export markets. These agreements would likely need to be bilateral, as they offer the greatest advantages for the U.S. In the first Trump Administration, we pursued such opportunities, securing a trade agreement with Japan that significantly expanded agricultural market access and achieving much of what TTP would have.
Representative Beyer (D-VA): Are U.S. agricultural exporters the first to be subject to retaliatory of tariffs on their goods? Doud: We have seen this before, with other countries attempting to game the U.S. through their currency manipulation, regulatory policies, and fiscal policies. There are many challenges in our trade relationships, but in agriculture, the biggest hurdle is global protectionism. Every country seeks to protect its own farmers, often putting U.S. agriculture at the front line of trade disputes.
Representative Murphy (R-NC): How can we address the issues in transshipments? Gerrish: Transshipment is a major problem, and the Fighting Trade Cheats Act would be an important addition to our enforcement toolbox. The Leveling the Playing Field Act 2.0 would strengthen the ability to combat evasion of anti-dumping and countervailing duties, including transshipment. Additional issues and concerns include misclassification of products to evade duties and undervaluation to lower duty liabilities. Further improvements should also be considered, such as imposing stricter requirements on companies appealing enforcement decisions and allowing CBP to initiate investigations independently.
Representative Sewell (D-AL): Why are the Leveling the Playing Field Act 2.0 and Fighting Trade Cheats Act common sense, bipartisan solutions that we should prioritize? Gerrish: These provisions would expedite successive investigations, addressing cross-border subsidies distorted costs caused by Chinese overcapacity and companies in third countries sourcing inputs from China.
Representative Steube (R-FL): What role do antidumping and countervailing duties play in protecting U.S. industries? Are there any gaps in how these tools are currently applied? Gerrish: There are many limitations in the current system that need to be recognized to enhance remedies, many of them included in the Leveling the Playing Field Act 2.0, such as addressing circumvention and evasion of duties. Some of these practices include transshipping through third countries, where companies falsely change the country of origin to evade tariffs and anti-dumping and countervailing duties. They also misclassify products to escape coverage, undervalue goods to pay lower duties, and set up operations in third countries to completely avoid tariff payments.
Representative Fischbach (R-MN): What is the importance of access to foreign markets for agriculture, how do exports relate to commodity prices, and how can the U.S. step up trade enforcement to ensure new and continued access to export markets? Doud: Trade deals are very important, but trade enforcement is just as critical. The first WTO trade enforcement case involved a dispute with the EU. Rather than fixing the issue, they paid compensation as a clear indication of its protectionist approach. Our goal is to expand global consumption, thereby increasing U.S. exports and trade. The U.S. aims to grow trade, improve diets worldwide, and expand protein consumption as a key U.S. advantage. Commodity prices and economic stability are deeply tied to producers’ ability to sell to global customers.
Representative Miller (R-OH): What are the structural trade barriers driving deficits? What role can new, enforceable trade agreements play in addressing these market access barriers? Doud: The EU’s subsidies and protectionist policies go beyond just meeting food safety or product standards; they require compliance with every step of their process protocols to gain market access. For decades, we have discussed European subsidies, but now they no longer hide their protectionism. When the U.S. finds a way to meet their processes, requirements, and standards, they shift the rules and are constantly moving the goalposts.