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Biden campaigned against the trade war with China, but ending it is complicated

Oct 2, 2021
Originally published on October 3, 2021 6:58 am

When President Biden was running for office, he described the steep tariffs on Chinese imports put in place by then-President Donald Trump as hurting U.S. consumers, farmers and manufacturers.

But nine months into his time in the White House, there has been no sign that Biden is preparing to quickly abandon the use of Trump's signature tariffs.

After a lengthy review that has frustrated U.S. business groups, who say the tariffs have been an unfair burden, U.S. Trade Representative Katherine Tai plans to give a major speech on the U.S.-China trade relationship on Monday.

Tai is expected to lay out some of Biden's initial steps to address the China trade policy dilemma: how to protect American workers and businesses from predatory trade practices without hurting the parts of the U.S. economy that rely on Chinese goods.

In an interview last week with Politico, Tai said the Trump tariffs have been effective at focusing attention on the issue. Tai told Politico the tariffs are "a tool for creating the kind of effective policies, and [are] something for us to build on and to use in terms of defending to the hilt the interests of the American economy, the American worker and American businesses and our farmers, too."


'It's really hard to come up with an alternative'

When Trump launched his trade war with China in 2018, it was a sudden and significant departure from a philosophy of free trade and open markets that had dominated American trade politics for decades.

He imposed tariffs on about $360 billion worth of goods imported from China, a strategy intended to give the administration leverage to force China to come to the negotiating table. Former Trump officials said it ultimately led to a deal that pledged more protections for U.S. intellectual property.

Kelly Ann Shaw helped negotiate that deal, known as Phase One. The former deputy director of the National Economic Council said it's easy to criticize tariffs but difficult to come up with a better option.

"Controversy over tariffs and their role in the economy and their role as a tool of economic statecraft have been debated in U.S. policy for 200 years," she said. "Tariffs are an imperfect tool ... but it's really hard to come up with an alternative."

A U.S. flag flies near containers stacked high on a cargo ship at the Port of Los Angeles in this file photo.
Frederic J. Brown / AFP via Getty Images

Chamber: tariffs hurt U.S. consumers, manufacturers

Biden has made countering China a centerpiece of his foreign and domestic policy, often complaining that better policies are needed to ensure the United States can better compete with the economic powerhouse.

As the Biden administration's review of the tariffs dragged on, frustration from business groups has grown.

Last month, more than 30 business associations sent a letter to the administration complaining the tariffs are "costly and burdensome."

"We were never in favor of these tariffs. We thought they imposed a tax on American consumers and, of course, American manufacturers," said Myron Brilliant, head of the international affairs division at the U.S. Chamber of Commerce. "But we think it's probably not realistic in the context of where the U.S.-China relations sit today to see all the tariffs removed at one time."

Economists have largely panned the tariffs, too. A recent paper from the National Bureau of Economic Research confirmed that "U.S. consumers of imported goods have borne the brunt of the tariffs through higher prices." And critics say this is even more of a challenge at a time of high inflation.

But Chad Bown, a senior fellow at the Peterson Institute for International Economics in Washington, said economic arguments don't carry much weight in what is essentially a political argument.

"Arguing the merits of economic costs is sort of like shouting at windmills because it's not only about economic costs and efficiency anymore, it's about national security. It's about supply chain resilience and public health," Bown said.

"I've sort of accepted that politically [tariffs] may be impossible to get rid of. There's no going back," said Bown, adding he hopes the Biden administration may look at a more judicious use of tariffs, if it decides to continue using them.


Trump strategy failed to change Chinese practices

Critics also complain the Trump strategy has failed to change Chinese trade practices. Under the Phase One deal, which is set to expire at the end of 2021, China pledged to purchase an additional $200 billion of U.S. exports. But it has so far fallen about 30% to 40% short of that promise, said Bown, who has been tracking the results of the deal.

"Even with the Phase One agreement, China did not commit to make tremendous amounts of change of the kinds that we're worried about with its economy, state-owned enterprises, its economic system," said Bown. "I just don't think that the United States going at it alone through tariffs is going to induce that kind of change."

The deal also did not address one of the thorniest issues: subsidies. "The single biggest complaint that the United States has about what China has done is that it's captured all of this market share and created these huge, huge companies on the backs of government subsidies that are provided to Chinese companies," said Jennifer Hillman, a senior fellow for trade and international political economy at the Council on Foreign Relations.

A big question for Biden is whether he lets the Phase One deal expire at the end of the year, or whether he tries to renegotiate it. Another complicating factor: the Biden administration's desire to work with China on climate. "China has made it very clear ... if you want cooperation on climate change, we want you to lift the tariffs or we want more cooperation on tariffs," Hillman said.

U.S. Trade Representative Katherine Tai, left, and Secretary of State Antony Blinken met with European counterparts last week on trade and technology issues in Pittsburgh.
Nicholas Kamm / AFP via Getty Images

Go it alone, or work with allies?

And so the key question is , how does the U.S. government convince China to change?

Biden and his team say they cannot do it alone and they have been trying to work with allies. The assumption is that when the United States joins with other democracies, its economic clout grows, and China cannot afford to ignore such a large chunk of the global economy.

During the G-7 summit earlier this year, Biden pushed his European counterparts to adopt a tougher stance with China and single out Beijing for its "non-market economic practices."

But some countries remain cautious. Shaw, who joined law firm Hogan Lovells after she left the Trump administration, said the idea of working with Western allies to collectively combat China is only effective if the allies go along with the solution too.

"What we've seen more often than not is while they may be with us in terms of the substance of the issues, they've made their own calculated decision that they don't want to come out as strong against China," said Shaw.

And yet some say that's precisely because of the unilateral tariff actions the United States took.

"The Phase One deal and these tariffs are in so many ways pushing away our allies and our partners at the time when we need them most," said Hillman, who also previously served as a judge in the World Trade Organization.

Chinese President Xi Jinping arrives at a reception in Beijing in this file photo from September.
Greg Baker / AFP via Getty Images

The politics are harder now

Geopolitics and domestics have changed dramatically since the last time a Democrat was in the White House, and that makes a crafting a new trade vision a challenge for Biden.

China under Xi Jinping has become more authoritarian and assertive, and as a result, U.S. national security concerns and economic interests have become more intertwined.

American attitudes have also shifted. Polling from the Pew Research Center finds that more than three quarters of Americans have an unfavorable view of China.

"That negative perception of China among the American public has really shot up in the last few years," said Anna Ashton, vice president of government affairs at the U.S.-China Business Council, a trade association representing American companies that do business with China. "I don't think that there is popular tolerance for going back to just the way it used to be."

Being tough on China is now a widely accepted bipartisan stance. Earlier this year, the Senate — in a rare moment of bipartisanship — passed a bill that would invest $250 billion in science and technology aimed at boosting U.S. competition with China.

Experts say rolling back tariffs could be interpreted as being weak on Beijing.

"I do think that politically it will be very difficult for the Biden administration to remove any tariffs without meaningful concessions from China," Shaw said.

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SCOTT SIMON, HOST:

When President Trump launched a trade war with China, Democrats warned it was a reckless move that could hurt the U.S. economy. And yet, as NPR's Asma Khalid reports, it's nine months into Joe Biden's presidency, and there's still no sign that this president plans to abandon the signature weapon of that war - tariffs.

ASMA KHALID, BYLINE: When Joe Biden was running for president, he campaigned against Donald Trump's tariffs.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT JOE BIDEN: President Trump may think his being tough on China - all that he has delivered as a consequence of that is American farmers, manufacturers and consumers losing and paying more.

KHALID: Trump said China was trading unfairly, and so he imposed tariffs on approximately $360 billion worth of imports. And yet, for all of Biden's criticism, those tariffs are to date still in place. Biden's team has been reviewing trade policy for months behind closed doors.

On Monday, some of those insights will come out. U.S. Trade Representative Katherine Tai will deliver a major speech on the U.S.-China trade relationship. Biden wants the U.S. to be more competitive with China, but it's not clear what tools he has to do that.

MYRON BRILLIANT: The reality is that we don't hold all the cards.

KHALID: Myron Brilliant is with the U.S. Chamber of Commerce.

BRILLIANT: It's not just about what is our policy towards China, but it's also about what's going on in China.

KHALID: Under President Xi Jinping, China has become more economically aggressive, and that makes it harder to get rid of the tariffs.

BRILLIANT: We were never in favor of these tariffs. We thought they imposed a tax on American consumers and, of course, American manufacturers. But we think it's probably not realistic in the context of where the U.S.-China relations sit today to see all the tariffs removed at one time.

KHALID: Despite the cost to Americans, some experts say trade policy isn't really about economics anymore.

Chad Bown with the Peterson Institute for International Economics says studies show tariffs have hurt the American economy. But he's also sort of accepted that politically, it's just not easy to get rid of them.

CHAD BOWN: Arguing the merits of economic costs is sort of like shouting at windmills because it's not only about economic costs and efficiency anymore. It's about national security. It's about, you know, supply chain resilience and public health.

KHALID: The pandemic underscored some of the problems of relying on goods from overseas, and American public opinion has hardened toward China. Polling from the Pew Research Center finds that more than three-quarters of Americans have an unfavorable view of China. Again, Chad Bown.

BOWN: What has happened in the United States is China is now a bipartisan issue, unpopular both with Republicans and Democrats. And simply going back to the way things were before President Trump would be viewed politically as somehow being weak on China.

KHALID: The U.S. doesn't have a lot of options to take up its trade complaints against China. And some believe tariffs give the United States leverage.

KELLY ANN SHAW: It's easy to criticize and to say, you know, this tool doesn't really get at the challenges that you're facing. But it's really hard to come up with an alternative.

KHALID: Kelly Ann Shaw worked on international trade issues in the Trump administration.

SHAW: Tariffs are an imperfect tool, but they are one that seems to work, and they at least get attention sufficient that it brings China to the negotiating table or at least to talk about issues.

KHALID: Shaw helped negotiate the phase one deal with China, in which Beijing agreed to buy a lot of goods from the United States. But China has not completely lived up to the deal. Plus, that trade pact didn't touch on one of the thorniest issues - subsidies.

Jennifer Hillman is with the Council on Foreign Relations.

JENNIFER HILLMAN: The probably single biggest complaint that the United States has about what China has done is that it's captured all of this market share and created these huge, huge companies on the backs of subsidies - government subsidies that are provided to Chinese companies.

KHALID: But perhaps the biggest distinction between Trump and Biden isn't how they view tariffs or how they view China, but how they view the world. Biden believes in the strength of alliances and is convinced he can pressure China more effectively if he gets Europe and Japan on the same side. But that only works if your allies agree to come along.

Asma Khalid, NPR News. Transcript provided by NPR, Copyright NPR.