Higher tariffs tax strategic imports from China that undercut U.S. prices, sometimes below the cost of production, to capture market share of a good that, in an emergency, such as a pandemic or war, would be difficult or impossible to replace. At any time, a Chinese monopoly on a certain good could lead to high monopolistic pricing. China’s strategic “dumping” of products on U.S. markets is considered an unfair trade practice that increases economic and national security risks for the United States.
Washington is also critical of the Chinese regime for its human rights abuses, such as the genocidal enslavement of Uyghurs, and for not encouraging more domestic consumption by Chinese citizens. The latter would improve the Chinese standard of living and increase demand for imports from the United States, which would create U.S. jobs.
After decades of cheap imports, mostly from China, and the resulting deindustrialization of the United States, U.S. voters broadly support a tougher stand against the Chinese Communist Party’s (CCP’s) unfair trade policies. The former engagement policy of free trade with China in an attempt to move the country toward a market democracy has clearly failed.
As China got wealthier, in large part through trade with the United States and Europe, Beijing’s belligerent behavior, especially against the United States and our allies, only increased. This belligerence includes a likely coverup that led to the COVID-19 pandemic, the fentanyl crisis, and ongoing risky behavior against U.S. airforce planes and naval ships that could result in the deaths of U.S. servicemen. As a result, the U.S. public has become increasingly aware that continuing to enrich America’s most dangerous enemy through its unfair trade practices was perhaps the biggest strategic failure of foreign and trade policy in U.S. history.
The CCP has responded to the new U.S. tariffs by saying that they violate World Trade Organization (WTO) rules. China has used the WTO to leverage open markets worldwide, which brings into question whether the WTO is really an organization for the global good if it is being used by a totalitarian and genocidal regime to increase its own power at the expense of market democracies around the world.
Two main concerns about the Biden administration’s new tariffs are also being aired in the business press. First, the tariffs could lead to retaliatory tariffs imposed by the CCP against the United States. Second, they could increase inflation in the United States just as inflation is finally dropping to levels that could lead the Federal Reserve Bank to decrease interest rates.
However, the business press often caters to vested interests and their knee-jerk free trade ideology that advantages the biggest U.S. exporters to China while ignoring small U.S. businesses that are typically harmed by Chinese imports. Big exporters to China warn against new tariffs, which could provoke Beijing into retaliatory tariffs, and lead to significant inflation. Exporters to China who make such arguments could also be currying favor with Beijing.
While tougher tariffs against China are necessary, given its current economic and political state, the tariffs could be relaxed in the future if China democratizes and becomes a market economy that trades fairly with other countries.
Once the tariffs engage and U.S. industries are rebuilt, the tariffs will be politically difficult to remove. This could be avoided if the Biden administration and Congress include sunset clauses that would remove tariffs if China credibly turns into a market democracy. That may be seen as wishful thinking, but it would incentivize Beijing to do the right thing and remind China that the cause of the tariffs is not “protectionism” or anti-Chinese sentiment but the CCP’s attack on our market democratic principles and the human rights of the Chinese people.
