Why Biden is keeping Trump’s China tariffs in place
By Katie Lobosco, CNN
President Joe Biden reversed a number of Trump administration policies during his first year in office, but he left in place tariffs on $350 billion of Chinese goods imposed by his predecessor.
Some of these tariffs, which are paid by US importers, have been in place for nearly four years. Former President Donald Trump’s contentious trade war with China began in 2018 when he imposed tariffs on $50 billion worth of Chinese-made goods. Over the next year, it added duties on other items after Beijing retaliated with tariffs on some US-made products.
After months of escalation, Trump and Chinese President Xi Jinping reached a truce in early 2020, signing what is known as the phase one deal. He cut the rate of some of the tariffs, but left them in place, and China agreed to increase its purchases of American goods and agricultural products – setting an ambitious target of buying $200 billion more than before the start of the trade war.
But it is becoming clear that China has not achieved these goals. According to Chad Bown, senior fellow at the Peterson Institute for International Economics, which tracks purchases from China, he is on track to buy only 60% of the goods he has committed to buy.
Biden has suggested recently that’s why he’s leaving the tariffs in place, despite pressure from the U.S. business community to scrap them as companies battle inflation and supply chain disruptions. U.S. importers have paid nearly $123 billion to cover the cost of Chinese tariffs since 2018, according to U.S. Customs and Border Protection.
“It’s uncertain,” Biden said at a press conference last week when asked if it was time to start lifting some of the tariffs.
“I would like to be able to be in a position where I can say that they meet commitments, or more of their commitments, and be able to lift some of it. But we are not there yet,” he added.
China fails to meet phase 1 commitments
Under the terms of the agreement, China pledged to increase its purchases of US agricultural goods and projects, setting specific amounts for different categories to be purchased over the next two years.
Even when the deal was signed, experts were skeptical of China’s ability to meet its commitment. When the Covid-19 pandemic slowed trade around the world just weeks after the deal was signed, it was even more difficult for Beijing to meet the targets.
While China imports more from the United States than it did before the tariffs were put in place, it has failed to meet its commitments.
Exports of manufactured goods to the United States, including planes and automobiles, have yet to recover to pre-trade war levels. China has moved closer to its commitment to the United States agricultural exports, increasing its purchases of soybeans, wheat and corn. These exports almost stopped in 2018.
But the phase one deal dictates no repercussions in case China misses its targets. It’s up to Biden to decide whether to keep the tariffs in place.
Biden faces pressure from the business world
The tariffs hit a wide range of products made in China, including baseball caps, luggage, bicycles, televisions and sneakers. The tariffs make it more expensive for American companies to import these products from China, many of which are not made in the United States at a rate that keeps up with demand.
As inflation rises and supply chain disruptions continue, pressure from the business community is mounting on the Biden administration to lift tariffs. The move would not solve supply chain issues, but it could help ease some of the inflationary pressure importers are facing.
“It’s never been a good time for these tariffs, and now is a particularly bad time for them,” said Steve Lamar, president and CEO of the American Apparel and Footwear Association.
The new year is “really a continuation of the worst problems we’ve seen,” Lamar added, noting that supply chain disruptions are still causing shipping delays, some holiday products still haven’t arrived in store shelves and that the Omicron variant of the coronavirus has caused the temporary closure of some factories and retail stores.
Biden moving ‘slowly’ on trade policy
Early in Biden’s term, he focused largely on domestic politics, successfully pushing an economic pandemic relief bill and eventually an infrastructure investment package through Congress.
But in October, the Biden administration made some changes to its trade policy. He struck a deal with the European Union to ease Trump-era sanctions on aluminum and steel. As part of the deal, the EU also agreed to remove retaliatory tariffs on U.S. products, including Harley-Davidson motorcycles and Kentucky bourbon.
The Biden administration also announced in October that it would reinstate some Chinese tariff waivers that U.S. importers had previously received. The process for requesting reinstatement of expired waivers was launched in the fall, but requests are still being reviewed. More than 2,000 exclusions have been granted under the Trump administration but only 549 are eligible for another extension.
Meanwhile, Congress authorized two longstanding trade programs to expire at the end of 2020, increasing tariffs on a range of products from various countries. Legislation has been introduced to renew the programs, but has yet to be passed by both houses of Congress.
“When it comes to trade policy, the administration is moving very slowly,” Lamar said.
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