The Biden administration is reviewing the first set of tariffs placed on imports
from China. On Wednesday, the US-PRC goods trade deficit was reported as the
highest ever for the first quarter: $100
billion. Whoops. Tariffs haven’t narrowed the deficit, or caused Beijing
to respect intellectual property. Despite the Chinese government saying otherwise, tariffs don’t cause US
inflation. They basically don’t matter and survive because the Biden
administration has been unable to take actions that do matter.

The most nebulous impact of the 2018–19 tariffs is on China’s theft from and coercion of intellectual property holders. This is hard to measure, but both the United States Trade Representative and private sources point to the PRC’s predatory behavior remaining unchanged.

President Trump probably doesn’t care about that. He used
to, at least, care about the trade balance. On his watch, the US had our two
largest bilateral goods deficits with China ever. If we break those records
this year, it will be with President Trump’s tariffs still in place.

So the critics are right? No. In DC most arguments see two sides (or more) getting it wrong. Critics are wrong first about inflation. Tariffs boosted annual inflation in 2019–20, by less than 0.4 points for consumer prices. Since the economy has had time to adjust, removing tariffs now would have a smaller impact than that. And almost no impact where inflation is causing pain—gasoline, housing, and food.

Second view: China tariff revenue rose $43 billion from 2017 to 2021. In that period, US
consumption expenditure rose more than $2.6 trillion.
No one noticed. Third view: Any tariff reduction is a one-time event. If
sustained inflation is the problem, sustained dollar appreciation is a much
better solution. The dollar’s March
appreciation alone implies a bigger impact on consumer costs than
removing the China tariffs, though only if it’s maintained.

But a far uglier fault of some critics is that their objective isn’t slower inflation or any benefit for the US as a whole. Their objective is to restore pre-tariff relations with a cult of personality dictatorship which steals intellectual property, blocks access to its market, has created a surveillance state and internment camps,and may go to war with us over Taiwan.What’s more important than all that: money. Or at least promises of money.

This subset of tariff critics gives itself away by having only one meaningful alternative. Congress and the president should do something else—which the same critics will then oppose. The US should try still more engagement—as if “phase one” hasn’t just joined the pile of failed Sino-American agreements. The one meaningful alternative is, of course, companies receiving taxpayer funds, with no accountability.

These critics should be discredited, multiple times over.
Yet tariffs haven’t done what their advocates once promised. The right side of
this debate is the one with better policy choices than tariffs, choices that
will make serious, long-overdue changes in the US-China relationship.

The administration offers little beyond talk. A 301 inquiry into Chinese subsidies? Considered for eight months, not even begun. Same words but no action with respect to the flood of American investment that assisted the Communist Party 2017–2020. President Obama had no substantial China policy and Democrats lost in 2016. President Trump tried to pretend yet another deal with Beijing was a great idea and Republicans lost in 2020. Draw your own conclusions.

Congress is heading to House-Senate conference right now on what is supposed to be a China bill and
has the opportunity to replace tariffs with something far better. But this is
being wasted in a slew of empty findings, report mandates, and unrelated actions.

At the top of the congressional agenda should be reducing and ultimately eliminating American dependence on the PRC in critical supply chains, for example with regard to key starting materials and other ingredients in pharmaceuticals. This will marginally reduce the bilateral trade deficit. Much more important, it will make ordinary Americans less vulnerable to blackmail by Xi Jinping, which tariffs and talk have utterly failed to do.

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