Earlier this month, United States (US) President Joe Biden revealed that his administration is reviewing Trump-era tariffs on China and that he will talk to his Chinese counterpart Xi Jinping “soon.” The White House has not yet specified when the two leaders will speak but has hinted that a decision on the revision of these tariffs is imminent and that national security and economic aides are currently making recommendations to the president. However, given the bipartisan support for punitive measures against China (in light of rights abuses, increasing aggression across the Indo-Pacific, espionage, currency manipulation, and its undemocratic nature), many have argued that giving it such concessions risks projecting the US as weak and could severely harm both the country’s image and Biden’s already waning popularity ahead of the next election.
The tariffs imposed under President Donald Trump in 2018 applied a 25% duty on $370 billion worth of Chinese products, including diapers, clothing, and furniture. The penalties were aimed at reducing Washington’s trade deficit and pushing Beijing to adopt fairer trade practices. While some American businesses have benefited from the new protective policies against Chinese imports, manufacturing companies that use Chinese goods as inputs have suffered under the trade war. In fact, the policies have decreased profit margins, resulting in reduced wages and jobs and increased prices for consumers.
China believes that scrapping all US #tariffs on Chinese goods benefits China, the US and the world. Taking into account of current high #inflation, the quicker the US cancels the tariffs, the sooner its consumers and companies will see the benefits: #MOFCOM official. pic.twitter.com/WLWBKq149T
— Zhang Meifang张美芳 (@CGMeifangZhang) June 23, 2022
A study carried out by Moody’s Analytics a year after the tariffs were imposed found that the economic spat cost the US economy nearly 300,000 jobs and caused its GDP to contract by 0.3%. Another research carried out by the Federal Reserve Bank of New York and Columbia University found that they lowered equity prices by 6%, costing companies at least $1.7 trillion.
Moreover, combined with the repercussions of the Russia-Ukraine war and the lag from the COVID-19 pandemic, inflation in the US has reached its highest level in 40 years.
Against this backdrop, Biden has been forced to consider backing down against a key strategic and economic rival, despite simultaneously taking measures to curb its expanding footprint and punish it for rights abuses. Therefore, the removal of tariffs on China could make Biden appear weak ahead of the beginning of campaign season next year, a potentially critical decision as his approval rating dips below 39% in a highly polarised nation.
Joe Biden continues to claim 8.6% inflation is a global problem, yet Israel’s inflation is at 4% and Japan and China’s are at 2%.
— Jake Evans (@JakeEvansGA) June 15, 2022
US inflation is at record levels because of failed Democrat policies.
In fact, Scott N. Paul, the president of the Alliance for American Manufacturing, told The New York Times: “For a Democratic president to get rid of tariffs imposed by a Republican and basically give a free handout to the Chinese Communist Party is not something that’s really politically wise in any form.”
The Republican party’s opposition to giving greater liberties to China is no secret. “We need to rebuild American industry, not reward companies that keep their supply chains in China,” said Republican Senator Marco Rubio of Florida, who voted against a legislative proposal that allowed for leeway in the tariffs.
Moreover, even several Democrats have voiced their opposition to relaxing punitive trade measures against China. According to a New York Times report published in May, national security adviser Jake Sullivan, Agriculture Secretary Tom Vilsack, and US Trade Representative Katherine Tai have all argued against slashing tariffs on China. Tai has said tariffs on Chinese goods are an important measure because they give Washington “a significant piece of leverage.” She has also opined that removing such protections would be unlikely to have a significant effect on short-term inflation.
Similarly, Senator Jon Tester (D-MT) has said the US “ought to be looking at doing business with somebody else.” “I would look at the tariffs and see how they impact agriculture, but I’m not inclined to pull them off. I think China’s doing things that aren’t good,” he opined.
However, voters appear to feel differently. In a survey conducted by the Pew Research Center, 44% of respondents said the tariffs on China were bad for the country, compared to just 30% who support the measures.
Ending China tariffs is smart policy and will lower costs to US business. We need to work with China to support a better economic relationship. It’s strategically important in many ways.
— Ross Gerber (@GerberKawasaki) July 6, 2022
Keeping this and the deteriorating economic situation in mind, both the Biden administration and experts believe that the US may have no choice. Jason Furman, an economist at Harvard University, asserted that “tariff reduction is the single biggest tool the administration has” to combat record-high inflation and unprecedented supply chain shocks.
In fact, Biden has made a series of decisions that he would not have otherwise made in the absence of the current economic situation, which could be interpreted as mismanagement and a lack of control, a damning indictment of the supposed leader of the free world. For instance, in May, the Biden administration eased sanctions on Venezuela, allowing Chevron to renegotiate its license with state-owned oil company PDVSA as the US seeks to diversify its energy portfolio after banning Russian imports. Washington also removed some high-profile individuals from its sanctions list.
Similarly, it eased Trump-era travel restrictions on Cuba just a few days later in a bid to restrict illegal immigration across the southern border.
China’s Foreign Ministry urges US to lift ‘all’ additional tariffs amid talks pic.twitter.com/X9FhGcyNQF
— Zhang Meifang张美芳 (@CGMeifangZhang) July 5, 2022
Yet, despite these concessions, the US continues to recognise opposition leader Juan Guaidó as the legitimate leader of Venezuela and refers to President Nicolás Maduro as a “brutal dictator.” Similarly, it has kept in place a decades-long trade embargo on Cuba and has also kept the Caribbean island nation on its list of state sponsors of terrorism. Critics of the Biden administration thus argue that the relaxation of sanctions comes from a position of weakness, as the president has been forced to offer these concessions in light of a spiralling economic crisis that he has failed to weather.
China appears acutely aware of the US’ waning bargaining power and has repeatedly predicted that US sanctions will end up hurting the US itself. In his virtual address at the High-level Dialogue on Global Development last month, Chinese President Xi Jinping warned that “protectionist moves will boomerang” and that countries “attempting to form exclusive blocs will end up isolating” themselves in the process. “Maximum sanctions serve nobody’s interest, and practices of decoupling and supply disruption are neither feasible nor sustainable,” he said.
Ultimately, the transactional and adaptive nature of foreign policy is not a new development. However, given the Biden administration’s outwardly focus on promoting democracy and building ties with ideologically like-minded nations and punishing those who fall foul of these standards, a relaxation of tariffs on China—and indeed other nations such as Venezuela, Cuba, and Iran—reflects poorly on his administration’s ability to shape global norms, drive change, and generally be the master of its own fate. Offering concessions wholly against his will could have a severe impact on Biden and the Democrat’s goals of re-election, as it will give the Republicans an easy talking point at a time when the majority of citizens are unconvinced by or disapprove entirely of the current government. However, given that these concessions have been made out of necessity and not choice, the Biden administration has no choice but to take this risk.