We should be restricting, not expanding, trade with China

 

On Monday, White House Press Secretary Jen Psaki said the Biden administration is reviewing China tariffs “through the prism of how they’re impacting industries here in the United States.”  

The administration has made no secret of its desire to remove some of the tariffs, which were imposed in 2018 by President Donald Trump pursuant to Section 301 of the Trade Act of 1974.

“We feel that a number of them have not been constructive and have hurt — had a negative impact on a number of industries,” Psaki said.   

Proponents of tariff relief argue it would lower the cost of Chinese goods. President Biden’s Tuesday statement on inflation, however, does not mention the tariffs.  

Last month, Treasury Secretary Janet Yellen said that lowering U.S. tariffs to stem inflation was “worth considering.” Her remarks followed those of Deputy National Security Adviser Daleep Singh, who mentioned that America could afford to reduce tariffs on non-strategic goods. 

“Why do we have tariffs on bicycles or apparel or underwear?” Singh asked.  

The Biden administration can let the tariffs eventually expire, but lawmakers of both parties have pressed the administration to lower them now by granting waivers. The Senate version of the China competition bill includes a provision that would direct the U.S. trade representative to reopen the tariff exclusion process.   

“The tariffs’ contribution to surging prices is minuscule,” Washington, D.C.-based trade expert Alan Tonelson told me. In fact, the tariffs have never had a big impact. China has borne about four-fifths of the 301 tariff cost by, one way or another, providing subsidies. Now, the plunging renminbi is further driving down the cost of Chinese goods.   

Just about everyone in Washington has forgotten that the tariffs were imposed as a remedy for China’s theft of U.S. intellectual property, which amounts to somewhere between, say, $150 billion to $600 billion a year. The tariffs were never much of a deterrent to Chinese criminality — Trump rarely talked about this aspect — but tariff opponents nonetheless need to address how they plan to deal with the rampant theft.  

There are, in addition to intellectual property considerations, two principal reasons to keep the tariffs in place. First, the tariffs have contributed to a necessary “decoupling”— the term Chinese President Xi Jinping uses — of the U.S. and China and that disengagement is in the interest of America. Bicycles, for instance, may look non-strategic, but in a larger sense, they are important.   

The People’s Republic of China has viewed the United States as its enemy — in May 2019, the official “People’s Daily” declared a “people’s war” on America — and all export revenues from the U.S. strengthen the Chinese party-state. Every purchase of a bicycle, for instance, gives China the funds for building a military that is configured to kill Americans.   

In short, there is no such thing as non-strategic imports from China. Jonathan Bass, the CEO of whomhome.com and Innova Luxury Group who last decade moved production of home furnishings from China to Mexico, told me, “America must regain its independence by manufacturing on this side of the Pacific.” Yellen, sensibly, advocates “friend-shoring” — buying goods from America’s allies and partners.   

The U.S., therefore, should “friend-shore,” “near-shore,” or “on-shore” industry. The extraordinary supply-chain disruptions evident last year will undoubtedly worsen as Beijing continues to enforce draconian disease-control rules and implement other measures restricting or slowing exports.   

Second, it is time for America’s trade policy to align with its values. President Bill Clinton delinked human rights considerations from trade privileges in May 1994. Rep. Chris Smith (R-N.J.), introducing H.R. 7193, is moving to relink them by taking away permanent normal trade relations status from China.   

Congress last month stripped Russia of this status, and now some think it is China’s turn. 

“Just as we should deny Russia the benefits of preferential trade due to its war of aggression against Ukraine and its civilian population, I equally believe we should hold Xi Jinping’s Communist regime accountable for its systematic genocide against the Uyghurs and other predominately Muslim Central Asian minorities, as well as Xi’s crushing of religious freedom,” Smith told me. “Until there has been a sea change in China’s human rights record, which I do not see happening as long as Xi is at the helm, we must deny China normal trade status.”  

The U.S. is bound by World Trade Organization obligations so the effect of permanent normal trade relations withdrawal would be limited, but the powerfully symbolic move would almost certainly accelerate decoupling.  

Signaling matters. As Tonelson, who blogs at RealityChek, notes, “Chris Smith’s bill would mark a major milestone in U.S. policy toward the People’s Republic, amounting to an official admission that treating this hostile, protectionist dictatorship as an ordinary trade partner was a disastrous mistake.”   

Gordon G. Chang is the author of “The Coming Collapse of China.” Follow him on Twitter @GordonGChang