Biden’s China tariff threats are more bark than bite, economists say

The Biden administration sent several signals this week that the United States is strengthening its economic strategy toward China.

on wednesday, President Joe Biden He met with Japanese Prime Minister Fumio Kishida in Washington, D.C., where he announced the strengthening of military cooperation between the two countries and emphasized the strength of the Japan-U.S. economic relationship.

At a joint press conference with Biden after the bilateral talks, Kishida said, “We agreed that the two countries will continue to work together closely to address challenges surrounding China.”

Earlier this week, Treasury Secretary Janet Yellen laid out tougher economic red lines on a visit to China.

Yellen amplified concerns shared by the United States and European Union members that Chinese companies are overproducing cheap clean energy products such as solar panels and electric cars. If there aren’t enough buyers to supply them, the Chinese government could dump them on the global market.

In an interview with CNBC’s Sarah Eisen after her meeting with Chinese Vice Premier He Lifeng, Yellen said that if China does not move to address overcapacity concerns, the United States will He said he had not ruled out the possibility of a tariff increase.

China has so far denied accusations of overcapacity, calling them “baseless.” counterattacked They argue that the United States is threatening protectionist trade policies to stifle global competition.

The prospect of new economic tensions between the United States and China is likely to help the two countries stabilize an already strained relationship after years of minimal communication, sparked in part by a years-long tariff war. This is happening while I’m doing this.

“It remains unclear what this relationship will look like in the coming months and years,” Yellen said at a news conference in Beijing on Monday.

Taken together, the administration’s moves provide a useful talking point for Mr. Biden in the 2024 campaign, when he and Republican Donald Trump represent China-hawkish worldviews.

However, there is also a risk that bilateral relations between the two superpowers will be frozen again.

Many economists believe that Biden’s threat to raise tariffs on China is more of a political tool than an economic one.

“This doesn’t solve the problem. It’s just a facade,” said Christopher Tan, a global supply chain professor at the University of California, Los Angeles. “In my opinion, this is a rallying cry for voters to support Biden.”

The president has stepped up his economic aggression toward China, as has Mr. Trump, and both are competing for the votes of American workers.

President Trump is It could impose a 60% tariff on all imports from China and a 10% tariff on all imports.

Biden has imposed his own tariffs on Chinese electric vehicles and other clean energy products. He doubled down on those threats, pledging to protect America’s green jobs that the Anti-Inflation Act of 2022 helped create.

“Tariffs don’t solve the fundamental problem, which is that there are structural problems in the Chinese system that haven’t been resolved,” said Daniel Rosen, co-founder of research firm Rhodium Group.

Rather, Rosen sees the tariff hikes as a “stop-gap measure” to temporarily curb a surge in excess capacity. He also said raising interest rates has political utility by showing voters that “the people in power right now are not sitting idle” when it comes to threats to the global economy.

Tariffs could have unintended economic consequences, potentially penalizing U.S. importers and consumers more than the intended Chinese exporters.

For example, one person said, U.S. importers were paying almost the entire cost of tariffs on China that were imposed during the Trump administration and largely kept in place under the Biden administration. report By the United States International Trade Commission.

“U.S. importers have absorbed the costs of tariffs through a combination of unfavorable margins for sellers and higher prices for consumers and downstream buyers,” the report said.

Part of the reason lies in loopholes that Chinese exporters can exploit to avoid tariffs.

“We can impose additional tariffs, but there are ways around it,” said Tan, a professor at UCLA.

for example, Office of the United States Trade Representative List tariff exemptions for specific products if interested parties demonstrate that the tariffs have caused economic harm in some way, or if the products cannot be imported from elsewhere.

Chinese exporters can also avoid tariffs by shipping their products to other countries during the final manufacturing stage before they are sent to their final destination in the United States. For example, China can avoid taxes by shipping battery components to Mexico, where the batteries are fully assembled before being exported to the United States.

Overall, higher tariffs could have a negative short-term impact on the U.S. economy.

Goldman Sachs estimates that each 1 percentage point increase in the effective tariff rate directly reduces gross domestic product by 0.03%, increases consumer prices by 0.1%, and increases inflation over the year. Then, the calculation is made.

“Since President Trump’s tariffs, we have seen the impact…many manufacturers have passed the increased costs on to consumers,” Tan said. “Then the question is, what exactly are we trying to accomplish?”