Our take: Biden should issue a ceasefire in Trump’s trade war
Former President Trump’s trade war with China is not going so well. Which begs the question, why is this going on at all?
Designed to balance the trade deficit with China and bring manufacturing back to the United States, and informed by the former president’s skewed views on trade, the trade war was one of Trump’s signature initiatives.
However, it achieves none of these goals. Instead, the trade war has cost American businesses tens of billions of dollars, which are generally passed on to consumers. It has increased production costs in the United States and probably reduced manufacturing jobs.
And a deal with China hailed by Trump as a major victory was a failure. The deal, reached in January 2020, obligated China to purchase at least $502.4 billion worth of certain U.S. products, including Maine lobster, over the next two years.
Instead, they only bought part of it – $288.8 billion, even less than before the trade war.
As one analysis put it, China hasn’t bought any of the additional $200 billion in US exports it promised as the main tenet of the deal. The pandemic, experts say, was not a major factor in the shortfall.
We also see who pays the fares. The Bangor Daily News recently reported on a family-run lumber business in Farmington facing $300,000 in import duties based on dowels purchased in China.
Business owners say they could have sourced the pegs nationally had they known about the tariff — businesses are unaware of the new laws; it’s up to them to look up the new laws in the Federal Register — but that would have cost more.
This is the dilemma facing many US manufacturing companies when it comes to tariffs on Chinese products. The supply chain is global and many of these companies rely on intermediate goods from China as part of their production process. In many cases, there is no national alternative and it is not easy to set one up and make it work.
So, by launching a trade war with China, Trump has only made American products more expensive, forcing companies to raise prices and cut jobs.
The trade war has also severed the ties between American companies and buyers in China that had been built over years, even decades. Even if relations between the two countries improve, these relations will take time to recover.
The Biden administration should waste no time repealing the tariffs, even if it seems unlikely.
Even though Trump’s tariffs have been ridiculed by Democrats in addition to trade pundits, Biden doesn’t seem ready to do so until China meets its commitments under the deal.
He also seems reluctant to be soft on China.
It’s absurd. Tariffs are hurting American businesses. They have already cost consumers $123 billion. At a time when prices are rising, tariffs add to inflation.
The tariffs do not bind China to its commitments, and they are not a boon to domestic manufacturing.
Rather, they do the opposite. Biden should cut the bait on this misguided strategy.
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