The Biden administration is wrestling with how to handle President Trump’s legacy of China tariffs without appearing “soft” on China in the upcoming congressional midterm elections. Here is a recipe for addressing most stakeholders’ concerns and surviving a tough election season ahead.
First, Trump imposed tariffs on $370 billion of Chinese imports. Biden is expected to announce that he will maintain and renew tariffs on all such goods pursuant to Section 301 of the Commerce Act of 1974. Maintaining Trump’s tariff structure would help Biden refute campaign allegations mid – “gentle” course on China.
Second, Biden should adjust the applicable Section 301 tariff percentages — as Trump did during the trade war — which currently sits between 7.5% and 25%. The upward adjustments are expected to target abuses of Chinese industrial policy identified in the Section 301 investigation and constitute retaliation for China’s failure to meet its phase trade agreement obligations. 1. Downward adjustments can help reduce price inflation in the United States and should aim to reduce tariffs on products that benefit less from Chinese industrial policies.
The tariff increases are getting “tough” on China and attracting trade hawks, while the decreases will introduce a worker-centric approach to addressing consumer and business complaints about the destructive impact of Trump’s tariffs.
The overall drag that Trump’s tariffs impose on the US economy will diminish if more tariffs are adjusted down than up. Consumer products and other goods not benefiting from China’s industrial policies could theoretically remain in place but fall to 1%. But tariffs for products benefiting from Chinese government subsidies, intellectual property rights (IPR) theft, forced technology transfer and other industrial policies, such as the Made in China 2025 plan, are expected to increase significantly.
Third, Biden must end endless internal strategies and announce a China trade policy that highlights the positives identified above. After more than a year in office, even Biden supporters aren’t sure where he stands on trade with China. The administration desperately needs to fill that policy void with a platform that Democrats can champion and uphold. Pending congressional legislation could of course change the rules of the game in some respects, but the prospects for passage are uncertain and the midterm elections are only months away.
The new Chinese policy should, in the interest of prioritizing immediate action, resolve various quiet trade issues that have been long debated. For example, the Biden administration should declare that Trump’s Section 301 case provides legal authority to take the actions described above and the debate over a possible new investigation under Section 301 should take place. Stop.
Similarly, debates on tariff exclusion should come to an end as tariff percentage reductions can achieve the same objective with immediate effect. Legal challenges to Biden’s policies are inevitable, but experience from the Trump years suggests the cases will take years to decide and are therefore irrelevant for the purposes of the 2022 midterm elections — and perhaps even the next presidential election.
Biden faces a choice between defining a carefully crafted China trade policy and letting the Republicans’ “soft on China” charge define him. He and his party must seize the initiative by boldly accommodating as many stakeholders as possible and win by gaining support from the intermediaries. Punishing China’s economic aggression, reducing the burden of Trump’s tariffs on the US economy, and regaining the initiative in the US political arena on China trade issues will not be easy. But this can be done.
Jeff Moon is a China trade and government relations consultant who previously served as Deputy United States Trade Representative for China Affairs.