Since former President Donald Trump departed from office, questions have been raised as to why President Joe Biden has not lifted Chinese tariffs to offer relief from growing inflation.
In 2018, President Donald Trump signed a memorandum under section 301 of the Trade Act of 1974 that allowed the United States Trade Representatives to implement tariffs on $550 billion of Chinese goods.
The taxes were set to increase domestic production, close the trade deficit, and punish China for “stealing U.S. companies’ intellectual property.”
While Trump’s tariffs initially targeted industrial goods, they eventually affected household goods as well, such as basic electronics and toys.
Though lifting such tariffs may seem like a solution to ease the cost of goods that are currently passed down to the American consumer, there is debate among President Biden’s advisers as to how effective such an act would be and what ramifications it could cause.
According to The Washington Post, a significant concern of Biden and his advisers is how the Democratic party will fare during November’s congressional elections.
As Biden has stated, inflation is his “number one domestic priority.” As it stands, the president has indicated that he is willing to cut tariffs by about 25%, which amounts to $335 billion annually.
However, the question looms: can enough be done to sway voters in time to keep Democrats as the majority in the Congressional House of Representatives?
The Hill, an independent political news outlet out of D.C., conducted a survey in April 2022. According to the data collected from that survey, a whopping 94% of Americans are reportedly upset or concerned over inflation.
The executive vice president of the U.S. Chamber of Commerce, Myron Brilliant, has spoken out as a proponent of Biden lifting the tariffs stating, “It’s a no-brainer to reduce tariff burdens on Americans at a time of high inflation. Hopefully, they will do something, but will they go far enough? That’s the billion-dollar question.”
Economists such as Gary Hufbauer, Megan Hogan, and Yilin Wang of the Peterson Institute for International Economics are not necessarily against eliminating Chinese tariffs.
However, they argue that the difference it would have on the economy before November is trivial, resulting in a meager 0.3% decrease in the overall CPI. According to their study, had Biden acted in April, inflation would be at 8% versus the current 8.3% currently.
For a cut in tariffs against China to have a significant effect, these economists state two major changes would be needed. First, Biden would have to cut all tariffs, which they note is unlikely to happen as he will likely keep at least the trade tax. Second, it would have had to happen sooner.
Biden would also likely be met with fierce opposition if he attempted to lift all Chinese tariffs, as they are heavily supported by labor unions and domestic manufacturers.
Labor unions and domestic manufacturers stand to gain by producing more goods in the U.S. instead of China. The Republican party has advocated for domestic production for some time — particularly since COVID-19.
Craig Allen, president of the U.S. China Business Council, summarized it as follows: “Tariffs are sticky. They’re easy to put up and really hard to bring down.”
Katherine Tai, the trade representative to President Biden, has a hawkish outlook concerning cutting Chinese tariffs.
She stated that studies like those done by Hufbauer and his associates are wishful thinking and that the U.S. should not throw away its “bargaining chip” of leverage for future renegotiations without a solid understanding of what it could gain in return.
She continued this sentiment by implying that U.S. companies would suffer and be choked out by Chinese competitors if the tariffs were lifted.
During an appearance at the Milken Institute, Tai stated, “We need to make sure that whatever we do right now … doesn’t undermine the medium-term design and strategy that we know we need to pursue.”
This strategy would involve increasing American-based production to lessen the country’s dependence on China.