According to Biden, Chinese Trade Tariffs are … Still on?
The Trump Trade Wars have drawn the ire of everyone from farmers and manufacturers to economists and politicians over the past four years. That’s why, when President Elect Joe Biden claimed he would dissolve these tariffs, it was a warmly met sentiment. Now, the Biden Administration has pivoted, announcing that it would maintain the Trump tariffs as trade discussions are ongoing with China. It’s a move that’s left some upset, others confused, and even more people cautiously optimistic. It’s a situation that’s more complex than it seems on the surface.
A strange turn of events
In August, Biden claimed he would eliminate the Trump tariffs on China, as a measure to alleviate many of the domestic stressors caused by them. Shortly after, Biden walked these remarks back, claiming his administration would reevaluate the United States’ position as it approached negotiations with China. Now, Biden has announced his intent to keep the tariffs in place as negotiating leverage.
This move has created some uncertainties for Biden critics and allies alike. Critics who claimed Biden would be soft on China are being immediately proven wrong; meanwhile, allies are scratching their heads over the decision to continue with a divisive Trump administration policy. Some call it waffling; others cite it as a signal of Trump’s rightness in bringing a heavy hand to Chinese trade. But beneath it all, it’s a simple strategy for better negotiations.
Played right, this decision could be the best of both worlds, and the means to an end to trade tensions.
A strategic advantage in talks with China
Biden is cited as saying his decision to keep the tariffs in place is an important step in evaluating the situation and determining next steps. He told the New York Times:
“The best China strategy, I think, is one which gets every one of our — or at least what used to be our — allies on the same page,” Biden told the Times. “It’s going to be a major priority for me in the opening weeks of my presidency to try to get us back on the same page with our allies.”
In simpler terms, Biden isn’t going to give away leverage that might otherwise become useful in evening the import/export playing field with the world’s largest trade entity. While it’s unlikely tariffs will remain in place throughout a Biden presidency, it is likely that they’re stripped away as part of Phase II of a trade agreement — a follow-up to President Trump’s Phase I agreement, signed earlier in 2020.
Manufacturing watches on eagerly
While pundits and analysts scramble to decipher the Biden Administration’s motives, manufacturers are looking on with interest. The Trump Trade Wars have largely hurt domestic producers by driving up the cost of goods, stifling exports, and straining supply chains. Rolling back tariffs may restore some confidence to domestic manufacturing; however, rolling back tariffs with a level trade plan in place could do even more. Better terms without the use of tariffs as a strongarm could position domestic producers in an advantageous position in the coming years — especially with Biden’s Made in America plan on the horizon.