David Steinberg of the School of Advanced International Studies at Johns Hopkins University and Yeling Tan, a non-resident Senior Fellow at the Petersen Institute for International Economics (PIIE), stated that economic tariffs on China could "backfire politically" for President Biden. This is because China may start to lean on other nations for international trade, thereby reducing the effectiveness of any future tariffs. The statement was published in a May 30 PIIE blog post.
"Based on China's reactions to the Trump-era trade war, the United States is likely to face three significant consequences this time," said Steinberg and Tan. "Chinese society is likely to take a deeper turn toward protectionism. China's retaliatory measures might backfire politically for President Joseph R. Biden, Jr. And as China diversifies its trade away from the United States, the efficacy of any future tariffs will continue to erode."
In response to China's trade practices involving technology transfer, intellectual property, and artificially low-priced exports, the Biden Administration announced increased tariffs on $18 billion of Chinese imports, according to a White House press release. These efforts focus on industries such as electric vehicles, clean energy, and semiconductors. The administration claims this will create nearly 800,000 manufacturing jobs and reduce the trade deficit with China. The increased tariffs target sectors including steel, aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products to counteract China's overcapacity and unfair pricing that threaten U.S. industries.
According to Steinberg and Tan, since the Trump Administration's "trade war," China is expected to continue moving towards "protectionism." Under the Trump administration, tariffs on Chinese imports increased from 4% to 21%, while the Biden Administration has only raised tariffs on "a few narrow product categories" such as semiconductors and electric vehicles. During Trump's tenure, China strategically imposed tariffs to maximize political impact in the U.S., particularly targeting sectors vital to Trump's political base. This approach could be repeated in response to Biden's tariffs with China likely selecting goods for tariffs that would inflict political damage ahead of upcoming U.S. elections. The targeted retaliation aims to pressure U.S. political dynamics in China's favor.
China is shifting away from the belief in "free trade," according to Steinberg and Tan. "In the short term," they said, "some in the United States may view this shift in Chinese trade patterns as a welcome development in 'decoupling.' But China’s diversification into alternative markets also means that future US tariffs will have a much smaller bite and weaker leverage."
The Peterson Institute for International Economics (PIIE) is an independent nonprofit research organization.
