Policy

Biden closes in on China tariffs decision while midterms loom

A container ship is unloaded
Steve Helber
In this May 10, 2019, file photo, a container ship is unloaded at the Virginia International Gateway terminal in Norfolk, Va.

President Biden is contending with competing political and policy pressures as he closes in on a decision on whether to lift Trump-era tariffs on Chinese imports. 

On one hand, it’s one of the only options at Biden’s disposal to try to lower the price of everyday goods that are subject to tariffs of up to 25 percent.  

But axing tariffs would have a minimal impact on inflation, experts say, and doing so could alienate Biden’s labor union backers, some of his own Cabinet members and voters while causing him to look weak on China — all while heading into the midterm elections.

The U.S. is conducting its four-year review of the Section 301 tariffs placed on furniture, footwear, sunscreen, appliances, bicycles and other consumer goods, and officials have indicated the White House will announce its decision soon.  

Experts expect Biden to lift or reduce tariffs on a relatively tiny fraction of imports: as little as $10 billion worth of Chinese products out of the roughly $350 billion in goods slapped with tariffs by former President Trump. 

That move would likely appease White House advisers who see widespread tariff reductions as politically and strategically perilous ahead of November’s elections and Biden’s meeting with Chinese leader Xi Jinping expected to take place this month.  

“You have some Cabinet officials who don’t want to do anything that’s seen as helping China in any way, and you’ve got others concerned more with the economy, saying that tariffs haven’t really achieved any strategic objective,” said David Dollar, a senior fellow at the Brookings Institution. “So this seems like a compromise, but it’s weighted very much toward mostly keeping the tariffs.” 

Consumer prices rose 8.6 percent in the last 12 months ending in May, the fastest rate of increase in four decades. The Labor Department will release June’s inflation numbers on Wednesday.  

The White House wants to show that it is doing all it can to fight inflation without appearing soft on China in the run up to the midterms, and Democrats in several key races are touting their efforts to combat Beijing’s trade practices, which they say discriminate against U.S. workers.  

A recent Morning Consult poll found that 44 percent of Democrats preferred to keep China tariffs in place while 28 percent favored tariff reduction as of May, a sharp reversal from February, when 47 percent of Democrats wanted Biden to reduce the import levies to fight inflation. Just 24 percent of U.S. adults said they want reduced tariffs, according to the survey.  

“We cannot continue to enable China’s practices that cripple our workforce by allowing Chinese made products to flood our markets,” Rep. Tim Ryan (D-Ohio), who is running for Senate this year, wrote in a recent letter to Biden urging him to keep tariffs in place. 

Labor union support for the tariffs is another key factor for Biden, who on the campaign trail said he’d be the most pro-labor president in history and has closely aligned himself with union leaders. A coalition of top unions, including the United Steelworkers and United Auto Workers, filed a comment with U.S. Trade Representative Katherine Tai’s office last month stating that they are “united in the view” that tariffs should be extended. 

Roughly 400 organizations and companies have filed comments backing the tariffs, with some arguing that they have helped push U.S. businesses away from outsourcing, making the nation’s supply chains more resilient to geopolitical turmoil. 

“Canceling these tariffs would create further unhealthy dependence on Chinese supply chains and embolden future systematic trade abuses as bad actors know that the U.S. will not hold them accountable,” the National Council of Textile Organizations, Narrow Fabrics Institute and U.S. Industrial Fabrics Institute wrote in a letter to Tai.

Retailers and other major importers, on the other hand, are pushing for tariff reductions to lower consumer prices, seeing the inflationary environment as the best opportunity yet to roll back Trump’s trade agenda. Business interests on both sides of the debate are pushing for a more robust exclusion process that makes it easier for companies to win tariff exemptions.

“As inflation hits 40-year highs, families are spending more and getting less, hurting everyone. But retailers have a plan to lower prices: The first step is to repeal tariffs,” read a recent television ad from the National Retail Federation. “It’s time to act now, before it’s too late.” 

Biden administration officials have played down the inflationary impact of tariff relief in recent weeks, signaling that the White House won’t make aggressive cuts to Trump-era duties. 

“We should be clear about what lifting tariffs would and wouldn’t do. Lifting tariffs isn’t going to bring down top-line inflation in a very significant way. What it will do is help consumers on certain household goods,” Commerce Secretary Gina Raimondo said on NBC’s “Meet the Press” Sunday. 

“We are briefing [Biden] and I expect him to make a decision shortly,” she added. “And if he decides to lift certain tariffs, it will be because he knows he has to think about doing everything he possibly can to provide any relief to consumers. But he’s going to do it in a thoughtful way that is strategic … and without hurting American workers.” 

Tai and White House national security adviser Jake Sullivan want to keep levies in place to retain leverage in potential trade negotiations with China, while Treasury Secretary Janet Yellen has suggested that tariff cuts could be warranted. 

A widely cited study from the Peterson Institute for International Economics found that lifting tariffs on all Chinese imports would reduce inflation by roughly 0.3 percent in the near term, with the total impact potentially reaching 1 percent in the long run. The total impact would be far less significant if Biden goes through with small-scale tariff cuts.   

“If it’s $10 billion, that’s a very small amount in the American economy,” Brookings’s Dollar said. “So I think people would barely notice it.” 

Tags Biden China Gina Raimondo Jake Sullivan Janet Yellen Joe Biden Tim Ryan Xi Jinping
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