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Could the U.S. Remove Trump-Era Tariffs on Chinese Goods?

Jul 07, 2022

Amidst the background of the earth-shattering conflict in Ukraine, the Biden administration is mulling over a potential end to the U.S.-China trade war. 

There are two noticeable and reemerging themes concerning the Biden administration's considerations in the Indo-Pacific. 

First, the U.S. wants to reengage and reestablish its trade influence in the region. President Biden is increasingly involved in negotiations with South Korea and Japan officials while developing the anticipated Indo-Pacific Economic Framework (IPEF), including XYZ trade, digital standards, labor issues, clean energy, and infrastructure, according to Commerce Security Gina Raimondo. Although Japan suggested that the U.S. join the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP), the application is time-consuming and somewhat problematic for American workers. China applied to join the CPTPP while also launching its own Regional Comprehensive Economic Partnership (RCEP). 

The U.S. also reengaged with Southeast Asia during the U.S.-ASEAN (Association of Southeast Asian Nations) summit at the White House in May, where Washington pledged $150 for investments in clean energy, maritime security, and digital development. Although the U.S. remains a security guarantor in the region, China is the better trade partner, complicating many ASEAN nations' geopolitical positions. 

Second, in the context of these efforts, the Biden administration is also considering removing some of the Trump-era tariffs on Chinese goods to lower consumer prices amid growing inflation. Several national security advisors have opposed such a move, while others believe this would benefit the U.S. economy. Overall, the trade war has been considered a 'historic failure' by some because China failed to purchase the targeted U.S. exports as outlined in phase one of the trade deal. China has been vocal about its support for cutting tariffs, stating that it hurts both Chinese and U.S. citizens. To complicate matters, the China question is a point of contention between Washington and Brussels as the Biden administration plans to counteract China's 'aggressive digital and trade expansion,' which could hurt EU interests. 

In truth, the U.S.-China trade war cannot, and should not, develop into a more adversarial arrangement because the world is already under incredible economic and financial pressure as a result of clogged or severed supply chains, global inflation, and natural resource shortages.

The trade deficit between Washington and Beijing will remain, especially as the U.S. dollar appreciates against the renminbi. This will cause Chinese imports to be much more attractive than U.S. exports to the Chinese. According to the International Monetary Fund, global growth is expected to slow down to 3.6 percent this year, with world trade growth set to halve, from 10.1 percent in 2021 to 5 percent in 2022. The Chinese could open up to more U.S. exports. However, as the dollar appreciates, they become more expensive. 

Some possibility of future negotiations between China and Beijing were hinted at by U.S. Treasury Secretary Janet Yellen when she noted that removing Chinese tariffs would create 'desirable effects' on inflation. The Biden administration hopes for a modest or 'feasible trade liberalization package' to curtail the Trump-era taxes and pull back inflation. Should Washington remove the tariffs, the Consumer Price Index (CPI) could fall by 1.3 percentage points. This would be of national security interest and would, according to many, be long-term. 

However, even a potential U.S.-China trade deal must be examined in the context of the ongoing conflict in Ukraine. The conflict in Ukraine has decisively revealed the complete weaponization of the Western financial infrastructure against Russia. Further, Russia's economic importance, especially during periods of economic insecurity, has proven to identify pressure points on Western economies, which could cause severe economic weakness in the European Union and America. However, China and India, along with many other Asian, African, and Latin American countries, have abstained from or supported Russia in the conflict in Ukraine. 

The Biden administration is weighing the pros and cons of either diminishing or increasing its economic and diplomatic pressure on China during a likely prolonged proxy war against Russia. In an attempt to court ASEAN nations away from Chinese economic interests, Biden presents the possibility of increased pressure on Beijing while simultaneously considering the removal of Trump-era tariffs. China would be thrilled to have the tariffs lifted and it would slightly alleviate inflation in the U.S.

In short, Washington is probing for a new China-centric policy that will either hope to coax Beijing away from Russia or use the same playbook shortly against China by potentially weaponizing sanctions and diplomatically punishing China.

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