July 19, 2022
Oped: Biden’s China Tariff Cuts Would Hurt the U.S.
July 19, 2022
Published in the Wall Street Journal
President Biden may rescind some Trump administration tariffs on Chinese products, a move that would hurt U.S. workers and businesses, increase our already crippling trade deficit with China, and squander Washington’s negotiation leverage with Beijing over intellectual-property theft, threatening American security interests.
The administration’s purported justification—that removing these tariffs could slow inflation—is nonsense. Established pursuant to Section 301 of the Trade Act of 1974, the tariffs on Mr. Biden’s chopping block had almost no price impact across the economy when they were implemented. Consumer prices decelerated slightly after their implementation. To the degree the cost of the tariffs was passed on to American consumers, rather than paid by Chinese producers through price reduction or currency depreciation, it would have created a one-time price increase and couldn’t be responsible for today’s inflation.
Chinese imports in total make up only 2% of goods included in the consumer-price index and exclude key products like energy and food. Even the Peterson Institute for International Economics, an antitariff think tank, estimates that the removal of all Section 301 tariffs on Chinese goods would reduce CPI inflation by 0.26 percentage point at most. Senior Biden administration officials have admitted as much.
While eliminating these tariffs would do almost nothing to ease inflation, it would be a substantial concession to Beijing. The Section 301 tariffs were a response to decades of Chinese intellectual-property theft and other unfair trade policies and provided important leverage in achieving the Trump administration’s Phase One Agreement with China, which was implemented in February 2020. Rescinding any of them would signal that this president doesn’t take China’s intellectual-property abuses seriously and is willing to ignore that China is America’s primary geopolitical adversary—not a benign economic partner—which has dangerous implications for U.S. national security.
Beijing is currently engaged in an all-of-society push for global economic and military pre-eminence. Government-subsidized Chinese companies dominate several strategic sectors, including the renewable-energy supply chain and commodities such as steel and rare-earth metals, and the resulting profits and technology are being funneled into a multibillion-dollar overhaul of the People’s Liberation Army. Now outfitted with the world’s largest army and navy, the PLA is using its newfound power to threaten U.S. interests and allies.
China’s buildup depends on a campaign of intellectual-property violations aimed at acquiring advanced American technology and trade secrets to distribute to Chinese entities. In exchange for access the Chinese market, U.S. companies are routinely required to give up their most prized intellectual property. What Beijing cannot coerce from American businesses, it tries to steal through cyberattacks, frequently carried out by the PLA. Beijing bolsters these acquisitions by subsidizing Chinese firms’ purchases of U.S. companies with key technologies.
A lackadaisical attitude from the Biden administration on this rampant IP theft also has serious economic consequences. The U.S. government estimates that Chinese intellectual-property theft costs the American economy between $225 billion and $600 billion a year. China is the world’s top source of counterfeit and pirated goods; in 2020 alone, $1.03 billion of fake products from China were intercepted at the U.S. border. The FBI estimates it opens a new economic-espionage case against Chinese actors every 12 hours, and its China-related economic espionage caseload has increased 1,300% over the past decade.
The resulting U.S.-China trade deficit is more than $350 billion annually. The deficit’s unabated increase over decades has transferred trillions of dollars of American wealth to our main adversary. In the process it has cost many Americans their jobs as China has used unfair trade practices to destroy various U.S. industries. This has led to lower wages, increased income inequality, and the breakdown of many American communities.
Apart from the Chinese Communist Party, the primary beneficiaries of the Biden administration’s tariff reduction would be multinational companies that benefit from Chinese trade malfeasance. They would be able to increase their profits and avoid costly long-term investments in American manufacturing capacity. The China tariffs ensure that domestic manufacturers won’t be undercut by Chinese importers and have provided the foundation for a recent wave of reshoring. Reducing tariffs on Chinese goods will slow the revival of American manufacturing and hurt American economic resilience and productivity.
The White House may think that trying anything to limit inflation, even if it’s ineffective, will help the president’s sinking approval ratings, but rescinding these tariffs isn’t going to win Mr. Biden any popularity. Seventy-three percent of Americans support using trade remedies against China to protect American industries and workers, and 71% of voters support Washington continuing to impose Section 301 tariffs on China. Workers recognize how dangerous this policy would be. The AFL-CIO, America’s largest federation of labor unions, has stated that cutting Section 301 tariffs would “weaken US enforcement of trade laws that are necessary to stop China’s illegal trade practices.”
One can only hope the Biden administration makes the choice that supports American workers, businesses, and fair trade across the world.