According to the Wall Street Journal, the Biden administration will soon announce tariff preferences for some Chinese exports to the United States. This is the first time the Biden administration has directly considered cutting Trump-era tariffs on Chinese goods, and the change is reportedly due to domestic inflationary pressures. Tariff breaks from Washington would be a rare positive sign in times of heightened political engagement between China and the US, but the limited nature of such a signal should also serve as a reminder to China to prepare for future uncertainty in the global economic system.
Indeed, when the Biden administration signaled through media reports and official statements a few months ago that it was exempting some Chinese goods from tariffs, it was a tacit admission that the United States had lost a decades-long trade war with China. Since the Trump administration, the US government has imposed additional tariffs on Chinese goods, citing large trade deficits, structural barriers against US companies, and China’s low purchases of US goods as reasons. However, in recent years there has been more evidence that the trade war is hurting the United States itself.
China has not changed its trade behavior because of the US measures. The trade war has not changed the structural fact that China and the US have huge trade deficits and mutual trade dependencies. Data showed that the U.S. merchandise trade deficit widened 18.3 percent to a record $1.1 trillion for all of 2021, while China remained the single largest deficit country with a trade deficit of $355.3 billion, which is $41 percentage of the total. Although the deficit was below the record level of 2018, it was 14.5% higher than in 2020.
Meanwhile, the trade war is not “putting the cost on China.” According to 2021 Moody’s study, more than 90 percent of the tariff costs in a trade war between China and the United States will be borne by the United States itself. Matthew R. Shea, President of the National Retail Federation, noted that US Customs and Border Protection (CBP) has collected almost $136.5 billion from US importers since the tariffs went into effect in 2018, which has also significantly increased costs for US consumers. The attempt to “punish China” turned into a punishment for the United States itself.
Thus, with inflation still high, business interests have constantly asked the Biden administration to revise the tariffs. Now the administration is reportedly set to provide partial relief. The Biden administration sees the removal of some tariffs largely as a way to respond to internal dissatisfaction with the current high prices, especially under pressure from midterm elections at the end of the year. According to the study According to the Peterson Institute for International Economics (PIIE), a Washington-based think tank, if the Biden administration takes a number of steps to cut or eliminate various surcharges currently in place, it could end up lowering the U.S. consumer price index by 1.3 percent. . Industry representatives were also argue about the benefits of lowering or eliminating high tariffs for China, prompting Biden to actively consider cutting tariffs to try to show the White House is focused on fighting inflation.
However, the “tariff relief” disclosed in the news is not a full tariff cut for China, indicating that the Biden administration is still hesitant on the tariff issue and does not want to be interpreted as “a show of weakness towards China.” In the current political climate in Washington, even modest changes in China policy are likely to be met with strong skepticism from Republicans and Democrats alike, and tariffs are no exception. So for the moment this move is better interpreted as a political action on a domestic issue.
Biden and the Democrats have shown no intention of making big trade concessions to China. In contrast, a group of Chinese hawks led by the US Trade Representative Katherine Tai, insist on a more thorough study of economic and trade issues with China. As a result, the reported tariff breaks, if they become official, are simply the end of some of Biden’s previous policies rather than a fundamental shift in his approach to China.
In the face of the United States’ complex calculations to adjust some of its tariff policies on China, Beijing should continue to focus on promoting the global economy, establishing more stable economic and trade ties with other countries, and gradually expanding its business in other economic markets. At present, China’s trade with countries along the Belt and Road is in a stage of rapid growth. Data show that between 2015 and 2021, China’s goods trade with countries along the Belt and Road amounted to about $9.17 trillion, of which $1.8 trillion in 2021 alone, which is about $29.7 % of China’s total merchandise trade. China’s cooperation with the Belt and Road countries in the areas of investment, infrastructure construction, development of new energy sources and poverty reduction is also deepening. Meanwhile, the Regional Comprehensive Economic Partnership (RCEP), officially launched this year, will significantly strengthen economic ties in the Asia-Pacific region.
When the United States, still stuck in its internal political struggle, refuses to cooperate more closely with Beijing, China should actively enter the international market. At a time when the current global economy is facing multiple challenges, China must resolutely support the development of the global economy, as well as trade links and coordination, and respond more actively to confrontational narratives emanating from Washington.