President Biden’s team has turned its attention to one of the cornerstones of his predecessor’s China policy as it battles soaring inflation — the tariffs that target hundreds of billions of dollars worth of Chinese imports, ranging from photosensitive semiconductors to dog food. 

Many observers agree that Section 301 tariffs introduced under President Trump have contributed to consumer price inflation climbing to an annual rate of 8.6 percent in May, the highest level for four decades, by increasing the price of Chinese-made goods. Still, opinion is divided over whether reversing some or all of the tariffs now would make much of a dent in the rate of U.S. price rises — and what signal such a move would send to China.

This week, The Wire analyzes the cost of the tariffs, what imports have been hit the hardest, and how they have impacted the cost of everyday household goods — and asks whether they have achieved their goal of changing China’s trade practices. 

THE TARIFF EFFECT

The Trump administration’s goal in introducing tariffs was partly to reduce the U.S.’s trade deficit with China, and to force Beijing to address what the administration insisted were its predatory practices, such as intellectual property theft, forced technology transfers, and industrial subsidies. 

Proponents believe that applying the tariffs has put pressure on Beijing regarding trade, culminating in the Phase One trade agreement signed in January 2020. It has also forced the supplies of some critical goods to shift outside of China. “Tariffs on finished textile apparel from China have diversified sourcing to other areas of the globe, including…the United States, because brands and retailers are trying to mitigate risk out of China,” says Kim Glas, the president of the National Coalition of Textile Organizations (NCTO) and vice-chair of the U.S.-China Economic and Security Review Commission. 

However, recent data suggest the tariffs have done little to shift the U.S.-China trade balance, although the picture has been complicated by the pandemic and global supply chain disruption. The U.S.’s trade deficit with China stood at $30.6 billion in April, little changed from the average monthly level in the first six months of 2018, just prior to the tariffs initially coming in.

List	Date Established	Main Goods Affected	Tariff Rate	Import Value Affected (2021)
1	July 18, 2018	Cars, car parts, gas filtering equipment	25%	$6.17 billion
2	August 23, 2018	Electronics, motorcycles, iron & steel	25%	$2.6 billion
3	September 24, 2018	Metal furniture, vinyl floor coverings, wooden furniture	25%	$31.6 billion
4A	September 1, 2019	Transmission equipment, lithium-ion batteries, physical exercise equipment	7.50%	$7.17 billion

In the meantime, the trade war with China has escalated as Beijing introduced its own retaliatory measures. Some two-thirds of all Chinese exports to the U.S. are subject to tariffs, while 58.3 percent of American exports heading the other way face tariffs, according to analysis done by Chad Bown at the Peterson Institute for International Economics (PIIE). Experts say that China hasn’t kept its side of the Phase One trade agreement when it comes to promised orders of American products. 

“There was no chance that a 25 percent tariff was going to force the Chinese to give in and change their trade behavior,” says Derek Scissors, a senior fellow at the American Enterprise Institute. 

BIDEN’S POSER

Despite such skepticism, waiving the tariffs would still be a politically sensitive step. While their reversal could provide some inflation relief and demonstrate the administration’s willingness to respond to the needs of the American people, it could also leave the Biden team open to accusations of giving China a free pass on trade. 

“The conversation in Washington right now around these tariffs has broken down into two camps of either we should waive some tariffs for inflation, or we should maintain the status quo because it is tough on China,” says Clete Willems, who served as a trade negotiator during the Trump administration. 

One complicating factor is that reversing the tariffs alone is unlikely to bring inflation back down to low single-digit levels. “We estimate that waving section 301 tariffs on China, excluding the most sensitive high technology imports, would be a direct effect in removing about 0.26 percentage points from the CPI,” says Gary Hufbauer, a senior fellow at PIIE and co-author of a report on how trade liberalization could impact inflation.

A possible middle way for the Biden administration would be to raise or keep tariffs high on sensitive imports from China — such as semiconductors — while reducing or scrapping them on goods that offer consumers some price relief.

The goods that have faced the highest price increase as a result of China tariffs are largely clustered in the furniture, automobile, and electronics industries. Inflated consumer prices have been most keenly observed in gasoline, rent, and food prices. “Nobody is standing at the gas pump these days complaining about the cost of their underwear,” says the NCTO’s Glas. 

Willems, the former trade negotiator, says the U.S. needs a more focused tariff policy.

“What we should do is eliminate some for inflation while at the same time increasing others,” he says. “We should understand which tariffs have been more harmful to China than they have to us and reconfigure the tariff list so it’s more concentrated on those imports that are strategically meaningful.”

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