US-China trade war: Competing interests tug at Joe Biden as he mulls cutting tariffs on Chinese goods

  • Even the president’s advisers are split: some favour keeping duties as leverage in talks with Beijing; others want to reduce them at a time of high inflation
  • Biden looks prepared to roll back at least some fraction of the tariffs imposed during the trade war Donald Trump started four years ago

Any rollback of US tariffs imposed during the trade war with China are likely to be modest and the relief process protracted, said foreign trade experts and former US officials, adding that Washington’s growing focus on national security in trade flows could end up worsening relations.

This comes as US President Joe Biden has held off making a decision on a series of mandatory expiration deadlines to end the tariffs that began this week.

“I think the Biden administration will come out with something, but it’s politics. They can’t look like they’re soft on China,” said Nicole Bivens Collinson, head of international trade and government relations at the Sandler, Travis & Rosenberg law firm and a former negotiator for the Office of the US Trade Representative.

“This could ultimately be a 10- to 20-year problem because once you put tariffs in place, no administration is going to campaign on ‘I’m going to reduce tariffs on China.'”

With tariffs integrally linked to geopolitics, American politics and economics, analysts expressed a long shot hope that talks in coming days between Secretary of State Antony Blinken and Chinese Foreign Minister Wang Yi on the sidelines of the Group of 20 economies meeting in Bali might ease the situation.

That could happen, they say, if the two countries include tariff relief as part of some broader agreement that might see Beijing give ground on other geopolitical issues, such as military tensions around Taiwan or the fallout from Russia’s war against Ukraine.

Most see long odds of that happening, however, given the dismal state of US-China relations and a string of recent meetings that have yielded little progress on a host of problems.

These include this week’s virtual meeting between US Treasury Secretary Janet Yellen and Chinese Vice-Premier Liu He; last month’s meeting between top Chinese diplomat Yang Jiechi and National Security Adviser Jake Sullivan; and a frosty meeting in June between Defence Secretary Lloyd Austin and his Chinese counterpart General Wei Fenghe in Singapore.

On Friday, Biden said he needed more time. “I haven’t made that decision yet,” he told reporters at the White House when asked about reducing the tariffs. “They’re going through them one at a time,” he added, apparently referring to officials in his administration.

The president was scheduled to meet with his advisers on the tariff question later in the day with members of his administration divided over the issue.
Some, including Trade Representative Katherine Tai and National Security Adviser Jake Sullivan, favour maintaining the duties as leverage in negotiations with Beijing.

Others, including Treasury Secretary Janet Yellen, prefer to reduce or eliminate them to help the economy at a time of high inflation. A number of labour unions, an important base of support for Biden, oppose lifting them, with the business community divided.

On Thursday, Chinese Ministry of Commerce spokeswoman Shu Jueting repeated the call for Washington to cancel all punitive tariffs, which have seen the United States collect US$140 billion in duties since 2018. “The sooner the US cancels its tariffs on China, the sooner American consumers and businesses will benefit,” Shu said.

An overarching dynamic, say analysts, is that trade wars, like real wars, can be easy to start and very difficult to wind down. This is made worse by the conflicting pressures the Biden administration faces over any sanctions relief from various constituencies, political rivals and interest groups.

“It’s a no-win situation,” said Owen Tedford, an analyst with research firm Beacon Policy Advisors. “At the end of day, there won’t be enough to please anybody.”

“Putting tariffs on is always easy; you’re protecting industries,” he added. “But lifting them is always more complicated than people want it to be.”

This week marks the fourth anniversary of the first of four salvoes in the trade war begun by former president Donald Trump that has seen the punitive tariffs levied on some US$370 billion worth of Chinese imports. By law, these started to expire this week.

But the process is mired in minutiae, and some believe even limited rollback progress might happen only shortly before the next virtual meeting between Biden and Chinese President Xi Jinping, which has not been scheduled.

While the Trump administration may have hoped that successive waves of tariffs would prompt Beijing to open its market and reduce its trade surplus, they only appeared to stiffen Beijing’s resolve.

Trump levied tariffs on US$34 billion worth of Chinese imports in July 2018, another US$16 billion in August, an additional US$200 billion in September and on another tranche in 2019, leading to tit-for-tat responses from Beijing.

In recent weeks, a series of hints, floated proposals and arguments that tariff relief could help ease soaring inflation have suggested that Biden was nearing some sort of announcement.

“The biggest problem is that Biden won’t make a decision,” said Bivens Collinson. “The problem is that all these different ideas that have been floated, and each one by someone with an interest in making that happen. It’s sort of a ‘build them and they will come’ mentality.”

One three-point proposal floated in recent weeks would see the administration ease or eliminate tariffs on a relatively small percentage of the affected trade – a figure of US$10 billion has been mentioned – on products that resonate with middle-class voters, such as back-to-school items or clothing.

As outlined, this would be paired with procedures that would make it relatively easy for labour and industry groups to oppose sanctions relief – essentially by filing exemption requests – on much of the remaining US$300 billion plus in affected Chinese imports.

The authors of these exemption requests – which already total some 400 on the website of the US Trade Representative’s Office – are not identified publicly, although some industry groups have spoken out in favour or against keeping the tariffs in place.

US Treasury Secretary Janet Yellen, speaking during a naturalisation ceremony at George Washington’s home in Mount Vernon, Virginia, on July 4, also held a virtual meeting with Chinese Vice-Premier Liu He this week. Photo: AFP

A third plank would see Washington alter its trade rules to focus more on national security than economic damage in limiting or taxing Chinese imports under a section of trade law known as Section 301.

“If they go ahead and do a limited rollback, and have this exclusion process and this new 301 national security focus, I’m not sure it’s going to be welcomed by the Chinese,” said a former US trade official who requested anonymity because of continuing work with the administration.

“I think they will push back on the 301 provisions and will think the US is giving with one hand and taking with the other.”

Analysts added that a key administration justification, that tariff relief will help ease upward pressure on prices – US inflation rose 8.6 per cent in May, a 40-year high, angering voters – is more political than economic given the relatively small amounts under consideration.

“I don’t know if it will translate into people’s pocketbooks by November,” even if a decision is reached soon, said Tedford. “If we did this back in January, and this was the second round of relief, it might be a different story.”

Author: Mark Magnier, SCMP

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