President Biden could remove some of the Trump administration’s tariffs on Chinese products, a move that would hurt US workers and businesses, increase our already crippling trade deficit with China, and waste Washington’s negotiating space with Beijing over intellectual property theft and threaten American security interests.
The government’s purported rationale – that removing these tariffs could curb inflation – is nonsense. The tariffs on Mr. Biden’s chopping block, imposed under Section 301 of the 1974 Trade Act, had almost no impact on prices across the economy when they were imposed. Consumer prices fell slightly after their implementation. To the extent that the cost of the tariffs was passed on to American consumers, rather than being paid for by Chinese manufacturers through price cuts or currency devaluation, it would have resulted in a one-time price increase and could not account for today’s inflation.
Overall, Chinese imports account for just 2% of the goods included in the consumer price index, excluding key products such as energy and food. Even the Peterson Institute for International Economics, an anti-tariff think tank, estimates that removing all Section 301 tariffs on Chinese goods would reduce CPI inflation by at most 0.26 percentage points. Senior officials in the Biden administration have admitted as much.
While removing these tariffs would do almost nothing to fight inflation, it would be a significant concession to Beijing. The Section 301 tariffs were a response to decades of intellectual property theft in China and other unfair trade policies, and provided a key lever to achieve the Trump administration’s Phase 1 deal with China, which was implemented in February 2020 . Lifting any of these tariffs would signal that the president does not take China’s intellectual property abuse seriously and is willing to ignore that China is America’s main geopolitical adversary — not a benign economic partner — with dangerous implications for U.S. national security.
Beijing is currently in a societal quest for global economic and military supremacy. Government-subsidized Chinese companies dominate several strategic sectors, including the supply chain for renewable energy and commodities such as steel and rare-earth metals, and the resulting profits and technology are being funneled into a multi-billion dollar overhaul of the People’s Liberation Army. The PLA, now armed with the largest army and navy in the world, is using its newfound power to threaten US interests and allies.
China’s construction depends on a campaign of intellectual property infringement aimed at acquiring advanced American technology and trade secrets for distribution to Chinese companies. In exchange for access to the Chinese market, US companies are routinely asked to give up their most valuable intellectual property. What Beijing cannot force from American companies it seeks to steal through cyberattacks, often carried out by the PLA. Beijing supports these acquisitions by subsidizing Chinese firms’ purchases of US companies with key technologies.
A lax stance by the Biden administration on this rampant IP theft also has serious economic ramifications. The US government estimates that intellectual property theft in China costs the American economy between $225 billion and $600 billion a year. China is the world’s largest source of counterfeit and pirated goods; In 2020 alone, $1.03 billion worth of counterfeit products from China were intercepted at the US border. The FBI estimates that it opens a new economic espionage case against Chinese actors every 12 hours, and the number of China-related economic espionage cases has increased by 1,300% over the past decade.
The resulting trade deficit between the US and China is more than $350 billion annually. Decades of unabated deficit growth has transferred trillions of dollars in American wealth to our main adversary. In the process, many Americans have lost their jobs as China has used unfair trade practices to destroy various US industries. This has led to lower wages, greater income inequality, and the collapse of many American communities.
Aside from the Chinese Communist Party, the main beneficiaries of the Biden administration’s tariff cut would be multinational companies that profit from Chinese trade abuses. They could increase profits and avoid costly long-term investments in American manufacturing capacity. Chinese tariffs ensure domestic manufacturers are not undercut by Chinese importers and have set the stage for a recent wave of rebalancing. Lowering tariffs on Chinese goods will slow the revival of American manufacturing and hurt the resilience and productivity of the American economy.
The White House may think that trying to curb inflation, even if ineffective, will help the president’s falling approval ratings, but lifting those tariffs won’t win Mr. Biden popularity. 73 percent of Americans support using trade defense measures against China to protect American industries and workers, and 71 percent of voters support Washington continuing to impose Section 301 tariffs on China. Workers realize how dangerous this policy would be. The AFL-CIO, America’s largest trade union federation, has said cutting Section 301 tariffs “would weaken US enforcement of the trade laws necessary to stop China’s illegal trade practices.”
One can only hope that the Biden administration makes the choice that supports American workers, businesses and fair trade around the world.
Mr. Lighthizer was a US Sales Representative from 2017-21.
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https://www.wsj.com/articles/bidens-china-tariff-cuts-would-hurt-the-u-s-inflation-trade-deficit-national-security-consumers-beijing-economy-11658175481 Biden’s China Tariff Cuts Would Hurt the U.S.