In a ruling that applied most prominently to China and Vietnam, a U.S. district court in December ruled the department could not impose countervailing duties on goods from a non-market economy.
The law signed Tuesday is a quick response to that ruling. The new law "clarifies that the countervailing duty law can be applied to subsidized goods from nonmarket economy countries," the White House said in a statement.
In addition, the law allows the Commerce Department to "adjust antidumping duties applied to goods from nonmarket economy countries when countervailing duties are applied to the same goods," the White House said.
China has denied that it unfairly subsidizes its export companies. Chinese authorities have also said that subsidies for domestic firms have proliferated since the financial crisis struck.
China has pointed to the bailouts for U.S. automakers Chrysler and General Motors as examples of government subsidies.
Earlier this month, Chinese Commerce Minister Chen Deming called the countervailing bill that was wending its way through Congress, "out of line" with U.S. and international laws.
"Let me be clear: There are no prohibitive subsidies handed down by the Chinese central government," Chen said.