Will Chinese Tariffs Be Sacrificed on the Altar of High Inflation?

CommentaryReversing Trump-era tariffs on China appears to be inevitable. With year-on-year inflation at 8.6 percent, the Biden administration is trying to find solutions to the problem. An ongoing effort that has failed to dent the inflation numbers has been the tapping of the strategic petroleum reserve aimed at depressing the price of oil. The next big push appears to be associated with rescinding tariffs imposed on China by the Trump administration. In an interview on ABC’s news program “This Week,” Treasury Secretary Janet Yellen confirmed recent news reports that “President Biden is considering reversing some of the Trump-era tariffs on China to combat skyrocketing inflation.” She also stated that those tariffs “serve no strategic purpose,” as reported by The Washington Times. This is an odd claim because the original purpose of the tariffs was a response to China’s longstanding and unfair mercantilist trade practices. U.S. President Joe Biden meets with Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen in the Oval Office at the White House in Washington on May 31, 2022. (Kevin Dietsch/Getty Images) Yellen’s message was just a continuation of previous airing by Biden administration appointees on the subject of cutting tariffs. Commerce Secretary Gina Raimondo discussed the issue on CNN’s news program “State of the Union” on June 5. With the backdrop that some 93 percent of Americans consider price inflation to be the biggest problem to be fixed in the United States, Raimondo stated that the White House was considering tariff cuts. “The president has asked us on his team to analyze (the potential for tariff reductions) and so we’re in the process of doing that for him and he will have to make that decision,” she told CNN. And a web search of “Biden administration considering tariff cuts” on June 19 displayed over a dozen separate news reports speculating that tariff cuts would be used to “fight inflation.” But will cutting tariffs make a significant reduction in the rate of inflation? As reported by The National Interest on May 22, “according to the [Peterson Institute for International Economics] PIIE estimate, the inflation would fall by only 1.3 percentage points one-time if the United States ended all trade war tariffs.” Is there perhaps another purpose in cutting tariffs besides “fighting inflation”? An examination of recent news reports provides some clues. What are Tariffs? A tariff is a tax “imposed by one country on goods or services imported from another country,” according to the Tax Foundation. A government may choose to implement tariffs for various reasons: to protect one’s own industries from unfair competition, raise revenue to support various government functions, and exert economic pressure on the adversary and competitor nations. The U.S. government has used all three reasons over the years. In 1789, tariffs were implemented to protect new American industries from European competition. Tariffs make foreign goods more expensive than domestically-produced items, which has the double benefit of developing a domestic marketplace (precisely what transpired in the 19th century). Until the passage of the 16th Amendment in 1913, which initiated the federal income tax, the U.S. government was largely funded by revenue from tariffs, excise taxes, and the sales of federal lands. And tariffs have been used to exert pressure on competitors, for example, former President Donald Trump’s China tariffs implemented in 2018. The so-called “free trade policy” was a choice made by U.S. policymakers to facilitate communist China’s integration into the world economy. This came to pass when China was admitted to the World Trade Organization in 2001. By exploiting its top resource—its large population and associated low labor costs—China was able to undercut production costs in the United States and thereby provide cheaper goods and services than could be produced by American companies. The result was a gargantuan U.S. trade deficit with China and disaster for U.S. manufacturing concerns. The goods trade deficit with China rose to $33.9 billion this past March, according to the Coalition for a Prosperous America. As reported by Breitbart on May 29: “From 2001 to 2018, U.S. free trade with China eliminated 3.7 million American jobs from the economy—2.8 million of which were lost in American manufacturing. During that same period, at least 50,000 American manufacturing plants closed down.” Chinese workers produce various components at the Mansfield Manufacturing plant in Dongguan, southern China’s Guangdong Province, on Oct. 20, 2008. (STR/AFP/Getty Images) The Trump-era tariffs were the first attempt by a U.S. president to restore balance to U.S.-China trade and reduce the trade deficit with China since former President Richard Nixon and Secretary of State Henry Kissinger “opened China” in 1972. And the Biden administration is deliberating on whether and how to

Will Chinese Tariffs Be Sacrificed on the Altar of High Inflation?

Commentary

Reversing Trump-era tariffs on China appears to be inevitable.

With year-on-year inflation at 8.6 percent, the Biden administration is trying to find solutions to the problem. An ongoing effort that has failed to dent the inflation numbers has been the tapping of the strategic petroleum reserve aimed at depressing the price of oil. The next big push appears to be associated with rescinding tariffs imposed on China by the Trump administration.

In an interview on ABC’s news program “This Week,” Treasury Secretary Janet Yellen confirmed recent news reports that “President Biden is considering reversing some of the Trump-era tariffs on China to combat skyrocketing inflation.”

She also stated that those tariffs “serve no strategic purpose,” as reported by The Washington Times.

This is an odd claim because the original purpose of the tariffs was a response to China’s longstanding and unfair mercantilist trade practices.

Epoch Times Photo
U.S. President Joe Biden meets with Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen in the Oval Office at the White House in Washington on May 31, 2022. (Kevin Dietsch/Getty Images)

Yellen’s message was just a continuation of previous airing by Biden administration appointees on the subject of cutting tariffs. Commerce Secretary Gina Raimondo discussed the issue on CNN’s news program “State of the Union” on June 5.

With the backdrop that some 93 percent of Americans consider price inflation to be the biggest problem to be fixed in the United States, Raimondo stated that the White House was considering tariff cuts.

“The president has asked us on his team to analyze (the potential for tariff reductions) and so we’re in the process of doing that for him and he will have to make that decision,” she told CNN.

And a web search of “Biden administration considering tariff cuts” on June 19 displayed over a dozen separate news reports speculating that tariff cuts would be used to “fight inflation.”

But will cutting tariffs make a significant reduction in the rate of inflation? As reported by The National Interest on May 22, “according to the [Peterson Institute for International Economics] PIIE estimate, the inflation would fall by only 1.3 percentage points one-time if the United States ended all trade war tariffs.”

Is there perhaps another purpose in cutting tariffs besides “fighting inflation”? An examination of recent news reports provides some clues.

What are Tariffs?

A tariff is a tax “imposed by one country on goods or services imported from another country,” according to the Tax Foundation. A government may choose to implement tariffs for various reasons: to protect one’s own industries from unfair competition, raise revenue to support various government functions, and exert economic pressure on the adversary and competitor nations.

The U.S. government has used all three reasons over the years. In 1789, tariffs were implemented to protect new American industries from European competition. Tariffs make foreign goods more expensive than domestically-produced items, which has the double benefit of developing a domestic marketplace (precisely what transpired in the 19th century).

Until the passage of the 16th Amendment in 1913, which initiated the federal income tax, the U.S. government was largely funded by revenue from tariffs, excise taxes, and the sales of federal lands. And tariffs have been used to exert pressure on competitors, for example, former President Donald Trump’s China tariffs implemented in 2018.

The so-called “free trade policy” was a choice made by U.S. policymakers to facilitate communist China’s integration into the world economy. This came to pass when China was admitted to the World Trade Organization in 2001.

By exploiting its top resource—its large population and associated low labor costs—China was able to undercut production costs in the United States and thereby provide cheaper goods and services than could be produced by American companies.

The result was a gargantuan U.S. trade deficit with China and disaster for U.S. manufacturing concerns. The goods trade deficit with China rose to $33.9 billion this past March, according to the Coalition for a Prosperous America.

As reported by Breitbart on May 29: “From 2001 to 2018, U.S. free trade with China eliminated 3.7 million American jobs from the economy—2.8 million of which were lost in American manufacturing. During that same period, at least 50,000 American manufacturing plants closed down.”

Chinese workers
Chinese workers produce various components at the Mansfield Manufacturing plant in Dongguan, southern China’s Guangdong Province, on Oct. 20, 2008. (STR/AFP/Getty Images)

The Trump-era tariffs were the first attempt by a U.S. president to restore balance to U.S.-China trade and reduce the trade deficit with China since former President Richard Nixon and Secretary of State Henry Kissinger “opened China” in 1972.

And the Biden administration is deliberating on whether and how to return to the status quo ante on free trade.

What Beijing Says

The Chinese Communist Party (CCP) and its state-run media have been pressing the United States to rescind all Trump-era tariffs for months in the interests of “building good relations.” The reality is, of course, that rescinding those tariffs is in China’s direct interest and to its economic advantage.

Below are state media parroting the CCP’s narrative on tariffs:

On June 6, China Daily quoted Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, whose refined message aligned perfectly with the thinking of President Joe Biden’s own economic advisers: “Removing additional tariffs on Chinese goods is an important measure for the United States to curb its record-high inflation.”

On May 19, Shu Jueting, spokeswoman for China’s Ministry of Commerce, claimed that the “removal of tariffs will benefit the world,” according to China Daily.

Ma Xuejing, a senior fellow at the Center for China and Globalization, conveyed a softer line by stating thatthe correct choice for the Biden administration would be to swiftly lift all the punitive tariffs on Chinese goods,” according to a May 16 report by China Daily.

An unsigned editorial in Global Times on May 11 took a belligerent approach by claiming that “China has capability to tackle US’ double-faced trade tactics” and that “China has made it clear that it would not be bullied or forced into making concessions” on trade and tariffs.

Conflicts of Interest

With the CCP tariff messaging aligned with Biden’s team, can those team members be trusted to fully represent America’s best interests regarding trade negotiations and tariff policies associated with China?

The Biden administration is riddled with political appointees with conflicts of interest with China, including at least two of Biden’s cabinet-level officials directly involved in diplomatic and trade negotiations with their Chinese counterparts.

Before his confirmation as secretary of state, Antony Blinken previously “ran the University of Pennsylvania’s Biden Center for Diplomacy & Global Engagement while helping establish WestExec Advisors,” as reported by Breitbart.

WestExec was a consultancy firm that helped various universities pursue commercial activities in China. While Blinken was its managing director, the Biden Center received $60 million in Chinese donations, according to Peter Schweizer, author of “Red-Handed: How American Elites Get Rich Helping China Win.”

Epoch Times Photo
U.S. Secretary of State Antony Blinken (3rd L), Commerce Secretary Gina Raimondo (2nd L), and Trade Representative Katherine Tai (L) stand near European Commission Executive Vice President Margrethe Vestager (R) and EU Executive Vice President Valdis Dombrovskis (2nd R) as they participate in the U.S. and European Union trade and investment talks in Pittsburgh, Pa., on Sept. 29, 2021. (John Altdorfer/Reuters)

Raimondo also has a conflict of interest, as reported by The Washington Free Beacon: “A venture capital firm backed by the Chinese government is a major investor in an artificial intelligence company that counts Commerce Secretary Gina Raimondo’s husband as a top executive, a potential conflict of interest as her agency works to counter China on the world stage.”

China-related conflicts of interest extend to second and third-level appointees involved in the Biden administration’s economic and trade policies. For example, the National Pulse reported on June 16 that “Jack Markell—President Joe Biden’s pick to serve as ambassador to the international Organization for Economic Cooperation and Development—has a long history of partnering with Chinese Communist Party foreign influence groups and has called on Americans to ‘welcome’ and ‘understand’ the communist regime.”

And Biden appointee Dominic Ng, who represents the United States on the Asia-Pacific Economic Cooperation (APEC) Business Advisory Council (ABAC), has praised China’s authoritarian economic system by stating that “there is nothing better than that.”

According to a May report by the National Pulse, “Ng has been tied to a number of CCP-linked foreign influence groups, including the Committee of 100 and the China United States Exchange Foundation (CUSEF), which function as part of communist China’s United Front Work Department (UFWD).”

The Handwriting on the Wall

What do these various press reports mean for the future of China tariffs? Conflicts of interest and communist Chinese pressure have apparently paid off for China as the Biden administration continues to chip away at the Trump-era tariffs and other economic sanctions imposed on China.

The Washington Free Beacon reported that “the Commerce Department approved license applications for Huawei to buy hundreds of millions of dollars worth of chips for its growing interest in the automobile industry.”

Breitbart reported on May 29 that the Biden administration “will continue exempting a number of China-made medical products from US tariffs.”

On June 6, the Biden administration announced a 24-month tariff exemption on solar modules manufactured in Cambodia, Malaysia, Thailand, and Vietnam. The associated 18 percent tariffs were imposed by the Trump administration in 2018. They were targeted to affect imports from Chinese-owned companies that were circumventing tariffs by routing operations through those four nations, The Wall Street Journal reported.

And now Janet Yellen has recently indicated that even more tariffs that were imposed on China will be cut “in the interests of fighting inflation.” This, despite the will of the U.S. Congress being expressed in the passage of the Uyghur Forced Labor Prevention Act, which was signed in December 2021 and went into effect on June 21. The act prohibits the importation of any goods produced wholly or in part in China’s Xinjiang region.

Perhaps the White House should take a clue from Congress on the correct economic, trade, and tariff policies for China.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


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Stu Cvrk retired as a captain after serving 30 years in the U.S. Navy in a variety of active and reserve capacities, with considerable operational experience in the Middle East and the Western Pacific. Through education and experience as an oceanographer and systems analyst, Cvrk is a graduate of the U.S. Naval Academy, where he received a classical liberal education that serves as the key foundation for his political commentary.