Reviews | Biden could be about to blunder with China
Given the disastrous effects of price increases on Biden’s polls at home, it’s no wonder the president is looking for ways to deal with the inflation crisis. Enter the Treasury Department, the business community, Wall Street and the Chinese government with a simple plan: get rid of some tariffs imposed by President Donald Trump on Chinese products, which included everything from consumer goods to industrial machinery .
Biden’s top national security officials believe removing tariffs now would give Washington any remaining leverage over Beijing to curb its unfair trade practices and meet its economic commitments. The Chinese “competitors” are backed by Biden’s labor allies, who argue that such a move would come at the expense of American workers, a constituency Biden normally does not want to ignore.
The internal administration battle has now gone public, with the Treasury Department favoring the removal of some tariffs, and parts of the National Security Council and the Office of the U.S. Trade Representative opposing it. . Biden is expected to rule soon.
Treasury Secretary Janet L. Yellen said Wednesday that removing some of Trump’s Chinese tariffs could have a positive effect on inflation as well as “benefits for consumers and businesses” because they “are not not very strategic. Certainly, some specific US industries would benefit from some relief, and there is no doubt that Trump’s crude approach might need some ironing out.
Overall, today’s inflation is caused by many factors – Russia’s invasion of Ukraine, the resulting energy crisis, the food crisis, the ongoing pandemic – but the tariffs of Trump in China are not among them.
Data from the Bureau of Economic Analysis supports the argument that removing some of these tariffs would have little or no measurable effect on inflation. The benefits for consumers are illusory.
Biden might claim that removing tariffs benefits American consumers, but they won’t notice any difference. The main benefit would go to companies with large operations in China, as lifting the barriers would eliminate an irritant in US-China relations.
“The Treasury Department represents the financial community, and the financial community wants to get rid of tariffs because they will be treated better by the Chinese government regarding access to the Chinese market,” said Derek Scissors, senior fellow at the American Enterprise Institute.
Indeed, Beijing does not hide its desire to end the tariffs. That should tell us something; they represent a certain leverage effect. China is not honoring the “phase one” trade deal that Trump struck with Beijing in 2020 and is becoming more economically aggressive as its power grows.
Finally, it is irresponsible from a negotiation point of view: we may not like the way the tariffs were created, but why remove them for nothing?
In Tokyo, Biden will unveil his long-awaited Indo-Pacific Economic Framework, a set of ideas and initiatives designed to convince Asian governments that the United States is serious about trade and investment in Asia. China pressured Asian countries not to sign. If Biden backs down from fighting China’s unfair economic practices now, it sends exactly the wrong message to the region at the wrong time.
This month, Biden reneged on his earlier pledge not to unilaterally lift tariffs unless China’s behavior improves. At his May 10 inflation press conference, he confirmed that he was considering the move, saying: “We are looking at what would have the most positive impact.”
Dropping Chinese tariffs is a huge political loser. Whatever credit the administration gets for “doing something” against inflation will be more than compensated by the backlash of organized labor. And if Biden cuts tariffs and the trade deficit with China continues to grow, Republicans will use him to go after those voters.
“To claim to have a middle-class foreign policy or a worker-centered trade policy requires the support of the American workforce,” Michael Wessel, chairman of the Trade Representative’s Labor Advisory Committee, told me. “The administration has no right to define what these policies mean, the job does.”
As China’s economy struggles under the erratic policies of its dictatorial government, Washington should be helping American companies out of China, not helping them in. We should be doing more to deal with China’s economic aggression, not less. The good news: There’s still time for Biden to dodge this stupid, insane idea.