White House Rethinking China Tariff Strategy In Wake Of Taiwan Turmoil

In the wake of China’s military drills around Taiwan that followed House Speaker Nancy Pelosi’s visit to the island, the Biden administration is rethinking its plans to modify tariffs on Chinese goods, according to a Reuters report that cites “sources familiar with the deliberations.” 

Biden has been eyeing reduced tariffs as a means of countering U.S. price inflation that remains near 40-year highs. At the same time, the administration has been considering the imposition of new tariffs. Now, however, both kinds of adjustments are getting a new look as the White House is wary of signaling either weakness or escalation in the face of Chinese saber-rattling.  

“After Speaker Pelosi’s visit to Taiwan, it’s particularly complicated. So the president is weighing his options,” Commerce Secretary Gina Raimondo told Bloomberg TV. “He is very cautious. He wants to make sure that we don’t do anything which would hurt American labor and American workers.”

Commerce Secretary Gina Raimondo says Speaker Nancy Pelosi’s trip to Taiwan has made things “particularly complicated” when it comes to Biden modifying China’s import tariffs https://t.co/04PwcWtL6M pic.twitter.com/6AcuPWwM87

— Bloomberg TV (@BloombergTV) August 10, 2022

On Thursday, China announced it had “successfully completed various tasks and effectively tested the integrated combat capabilities of the troops.” The announcement seemingly signals the end of various war drills in the vicinity of Taiwan, which included mock sea and air assaults as well as ballistic missile launches that traversed airspace above Taiwan’s capital. 

“The Trump administration had approved tariff exclusions for more than 2,200 import categories, including many critical industrial components and chemicals, but those expired as Biden took office in January 2021. U.S. Trade Representative Katherine Tai has reinstated only 352 of them. Industry groups and more than 140 U.S. lawmakers have urged her to vastly increase the numbers,” reports Reuters. 

The foot-dragging on further tariff relief is due in part to China’s apparent disinterest in reciprocating. China has also failed to live up to commitments, under a 2019 trade deal, to increase its purchases of various American products and services. China has blamed Covid-19 economic disruptions. 

Pelosi’s controversial trip to Taiwan — which China claims as its territory — has reinforced Beijing’s intransigence. “The visit has undermined the political foundation of the China-US relations and will inevitably cause major disruption to the exchanges and cooperation between the two sides,” Chinese embassy spokesman Liu Pengyu told Reuters. 

The Trump tariffs are the subject of a lawsuit filed by scores of U.S. companies who’ve asserted the levies are overly broad and were improperly implemented. If the Biden administration can’t defend the Trump tariff regime, it could be compelled to evaluate tens of thousands of public comments about it, or reimburse the plaintiffs for tariffs they’ve paid so far. 

Tariffs are taxes on imported goods, and are paid by importers. They effectively raise the prices paid by both consumers and manufacturers who buy products and raw materials that are subject to tariffs. By raising the cost of imports, tariffs enable domestic producers of the tariff-targeted product to raise their own prices too.

Tariffs thus serve as a way of enriching selected domestic industries at a cost that’s imposed on their customers. To the extent those higher prices leave consumers with less money to spend on other goods and services, tariffs also exact a broader toll on the economy. 

Biden’s interest in pandering to labor unions also figures in his slow-walking his tariff-relief decision. Milton Friedman had something to say about that: 

“The benefits of a tariff are visible. Union workers can see they are ‘protected.’ The harm which a tariff does is invisible. It’s spread widely.”