When President Biden was running for office, he described the steep tariffs on Chinese imports put in place by then-President Donald Trump as hurting U.S. consumers, farmers and manufacturers.
But nine months into his time in the White House, there has been no sign that Biden is preparing to quickly abandon the use of Trump’s signature tariffs.
After a lengthy review that has frustrated U.S. business groups, who say the tariffs have been an unfair burden, U.S. Trade Representative Katherine Tai plans to give a major speech on the U.S.-China trade relationship on Monday.
Tai is expected to lay out some of Biden’s initial steps to address the China trade policy dilemma: how to protect American workers businesses from predatory trade practices without hurting the parts of the U.S. economy that rely on Chinese goods.
In an interview last week with Politico, Tai said the Trump tariffs have been effective at focusing attention on the issue. Tai told Politico the tariffs are “a tool for creating the kind of effective policies, and [are] something for us to build on and to use in terms of defending to the hilt the interests of the American economy, the American worker and American businesses and our farmers, too.”
On Monday, October 4th, @AmbassadorTai will speak @CSIS and lay out initial steps of the Biden Administration’s approach to realign the bilateral trade relationship with China. https://t.co/ZeapPScQ55
— Adam Hodge (@USTRSpox) October 1, 2021
‘It’s really hard to come up with an alternative’
When Trump launched his trade war with China in 2018, it was a sudden and significant departure from a philosophy of free trade and open markets that had dominated American trade politics for decades.
He imposed tariffs on about $360 billion worth of goods imported from China, a strategy intended to give the administration leverage to force China to come to the negotiating table. Former Trump officials said it ultimately led to a deal that pledged more protections for U.S. intellectual property.
Kelly Ann Shaw helped negotiate that deal, known as Phase One. The former deputy director of the National Economic Council said it’s easy to criticize tariffs but difficult to come up with a better option.
“Controversy over tariffs and their role in the economy and their role as a tool of economic statecraft have been debated in U.S. policy for 200 years,” she said. “Tariffs are an imperfect tool … but it’s really hard to come up with an alternative.”
Chamber: tariffs hurt U.S. consumers, manufacturers
Biden has made countering China a centerpiece of his foreign and domestic policy, often complaining that better policies are needed to ensure the United States can better compete with the economic powerhouse.
As the Biden administration’s review of the tariffs dragged on, frustration from business groups has grown.
Last month, more than 30 business associations sent a letter to the administration complaining the tariffs are “costly and burdensome.”
“We were never in favor of these tariffs. We thought they imposed a tax on American consumers and, of course, American manufacturers,” said Myron Brilliant, head of the international affairs division at the U.S. Chamber of Commerce. “But we think it’s probably not realistic in the context of where the U.S.-China relations sit today to see all the tariffs removed at one time.”
Economists have largely panned the tariffs, too. A recent paper from the National Bureau of Economic Research confirmed that “U.S. consumers of imported goods have borne the brunt of the tariffs through higher prices.” And critics say this is even more of a challenge at a time of high inflation.
But Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington, said economic arguments don’t carry much weight in what is essentially a political argument.
“Arguing the merits of economic costs is sort of like shouting at windmills because it’s not only about economic costs and efficiency anymore, it’s about national security. It’s about supply chain resilience and public health,” Bown said.
“I’ve sort of accepted that politically [tariffs] may be impossible to get rid of. There’s no going back,” said Bown, adding he hopes the Biden administration may look at a more judicious use of tariffs, if it decides to continue using them.
In 2020, China came up more than 40% short of reaching the annual legal commitment.
(It reached 59% of the commitment using US export statistics, and only 58% of the commitment using Chinese import statistics. The legal text says to evaluate relying on both trade statistics) pic.twitter.com/qvH1HtcLbx
— Chad P. Bown (@ChadBown) October 1, 2021
Trump strategy failed to change Chinese practices
Critics also complain the Trump strategy has failed to change Chinese trade practices. Under the Phase One deal, which is set to expire at the end of 2021, China pledged to purchase an additional $200 billion of U.S. exports. But it has so far fallen about 30% to 40% short of that promise, said Bown, who has been tracking the results of the deal.
“Even with the Phase One agreement, China did not commit to make tremendous amounts of change of the kinds that we’re worried about with its economy, state-owned enterprises, its economic system,” said Bown. “I just don’t think that the United States going at it alone through tariffs is going to induce that kind of change.”
The deal also did not address one of the thorniest issues: subsidies. “The single biggest complaint that the United States has about what China has done is that it’s captured all of this market share and created these huge, huge companies on the backs of government subsidies that are provided to Chinese companies,” said Jennifer Hillman, a senior fellow for trade and international political economy at the Council on Foreign Relations.
A big question for Biden is whether he lets the Phase One deal expire at the end of the year, or whether he tries to renegotiate it. Another complicating factor: the Biden administration’s desire to work with China on climate. “China has made it very clear … if you want cooperation on climate change, we want you to lift the tariffs or we want more cooperation on tariffs,” Hillman said.
Go it alone, or work with allies?
And so the key question is , how does the U.S. government convince China to change?
Biden and his team say they cannot do it alone and they have been trying to work with allies. The assumption is that when the United States joins with other democracies, its economic clout grows, and China cannot afford to ignore such a large chunk of the global economy.
During the G-7 summit earlier this year, Biden pushed his European counterparts to adopt a tougher stance with China and single out Beijing for its “non-market economic practices.”
But some countries remain cautious. Shaw, who joined law firm Hogan Lovells after she left the Trump administration, said the idea of working with Western allies to collectively combat China is only effective if the allies go along with the solution too.
“What we’ve seen more often than not is while they may be with us in terms of the substance of the issues, they’ve made their own calculated decision that they don’t want to come out as strong against China,” said Shaw.
And yet some say that’s precisely because of the unilateral tariff actions the United States took.
“The Phase One deal and these tariffs are in so many ways pushing away our allies and our partners at the time when we need them most,” said Hillman, who also previously served as a judge in the World Trade Organization.
The politics are harder now
Geopolitics and domestics have changed dramatically since the last time a Democrat was in the White House, and that makes a crafting a new trade vision a challenge for Biden.
China under Xi Jinping has become more authoritarian and assertive, and as a result, U.S. national security concerns and economic interests have become more intertwined.
American attitudes have also shifted. Polling from the Pew Research Center finds that more than three quarters of Americans have an unfavorable view of China.
“That negative perception of China among the American public has really shot up in the last few years,” said Anna Ashton, vice president of government affairs at the U.S.-China Business Council, a trade association representing American companies that do business with China. “I don’t think that there is popular tolerance for going back to just the way it used to be.”
Being tough on China is now a widely accepted bipartisan stance. Earlier this year, the Senate — in a rare moment of bipartisanship — passed a bill that would invest $250 billion in science and technology aimed at boosting U.S. competition with China.
Experts say rolling back tariffs could be interpreted as being weak on Beijing.
“I do think that politically it will be very difficult for the Biden administration to remove any tariffs without meaningful concessions from China,” Shaw said.