USA suffers more than China from high tariffs
In spite of the tariffs imposed by USA and China on each other and the ongoing Covid crisis, both the countries are shipping goods to each other at a pace which is fastest in years. It has become the World’s largest trade exchange. In the Quarter ending June 21, China has shipped goods worth $ 134 billion to USA and imported Just $ 41 billion from the USA ie a surplus of $ 93 billion in China’s favour. In the last quarter Oct-Dec 2020 the surplus in favour of China was a record $ 99 billion.
So no wonder, nearly three dozen of the US’ most influential business groups, representing retailers, chip makers, farmers and others, have asked the Biden administration to restart trade talks with China. They are also urging to cut tariffs on imports from China, saying the tariffs are a drag on the US economy. They raised the appeal in a letter to US Trade Representative Katherine Tai and Treasury Secretary Janet Yellen. This is the clearest collective voice of the US business community on hoping to restore normal US-China trade since the Biden administration took office.
Over the past six months, the Biden administration has been delaying making Any statement on US trade policy with respect to China under the excuse of making relevant reviews. However it has retained all China tariffs imposed by Trump administration. There are even moves to crack down on various Chinese companies. Piling pressure on Xinjiang-related trade issues have been quite prominent. In general, the US administration’s current trade policy toward China is highly “Trumpized.”
However, the trade war over the past three years have failed to fix problems as wished by the Trump administration. Moreover, it has harmed American companies and consumers more than the Chinese. Such awareness is becoming more and more common in the US. After a brief decline, China-US trade showed a tendency of a comprehensive recovery, and the US trade deficit further expanded. In the end, the US gets nothing in terms of bringing manufacturing back to the country. The Biden administration is now stuck in a predicament.
Only way out is what India has done. It has curtailed all non essential imports from China, mostly in the field of cheap consumer goods. USA must do the same and make the American companies shift their manufacturing base from China to India.
Normally, the US business community has a strong influence on government policies. When they collectively express their aversion toward tariffs, it is supposed to create immense pressure. However, when it comes to China-related issues, the US public opinion should be to urge not only shift of manufacturing from China but also to reduce consumption of goods made in China.
Playing tough toward China should become not only “politically correct” but also pragmatic. Since the midterm elections are approaching, Biden’s team is likely to believe that maintaining tariffs is a better way to win votes than removing them. It remains to be seen how much practical influence this appeal from the US business community can bring.
It is believed that US politics are now frozen. Any expectation for rationally reducing the tariff does not make sense any more. Fortunately, the US is a diverse society with large policy gaps. Though It is difficult to block demands in the market, which enabled China-US trade to rebound significantly against the odds of tariff pressure, It can surely be diversified. Given such a reality in the US, China will be forced to continue developing substantial ties with US enterprises, keep participating in the construction of International rules and conventions.
The Biden administration dares not reduce the tariffs imposed on Chinese products, but there is relatively large room to strive for tariff exemptions for certain goods from various other Asian Countries, specially India. Not diversifying imports are hurting the American consumers. That being said, cutting down the harm can be realized through exempting more products from tariffs. Indian and American companies should work together to boost efforts in this regard.
The Biden administration has increased the number of Chinese companies in the list of negative entities, but there have also been a few examples of Chinese companies being taken out of the list.
China has the strength to keep playing the game with the US in terms of trade policies, and it is right not to make concessions when playing tough is needed. Take TikTok. India just banned it outright for violations of Indian Laws insisted on not making any compromises. USA should also learn the lesson from the case.
Under the current background, where there are still many uncertainties, it is particularly not appropriate for The USA to take a step back in trade policy. Instead, USA should carry out tactical innovation in this game by diversifying its imports.
US high-tariff policy against the Chinese companies seems to have failed as they have generally adapted to the new situation, while the US is suffering more from the tariffs than China. So to avoid further problems, USA must go all out to diversify its imports.
