The change of heart is welcome because of the increasingly obvious threat Communist China poses to the United States and world. China’s government uses the wealth it receives from foreign trade to build its military and finance its global influence. The latest example: China signed a 25-year pact with Iran over the weekend, sealing a strategic partnership that effectively draws Iran into the Chinese orbit. That can only embolden the Islamic republic as it seeks to destabilize the Middle East and threaten Israel’s existence.
Trade with the United States is a significant source of the wealth China is using to bolster its influence abroad. The United States ran a $310 billion trade deficit in goods with China in 2020. That’s partly offset by trade surpluses in services and in goods traded with Hong Kong, which is effectively under Beijing’s thumb after last year’s crackdown. But it still means that U.S. consumers send hundreds of billions of dollars to our leading adversary each year in exchange for items such as cheap toys, clothes and washing machines. That fuels Chinese economic growth, which in turn fuels China’s foreign ambitions.
Tariffs have already started to reduce that trade, which in turn reduces China’s ability to harm U.S. interests. The trade deficit in goods hit a high of almost $419 billion in 2018. Imports of Chinese goods started to drop as Trump imposed more tariffs that year and in 2019. By 2020, U.S. firms were importing more than $100 billion less in goods from China than in 2018, a nearly 20 percent decline. That’s not enough to stop China in its tracks, but it is a significant hit to a regime that requires rapid economic growth to finance its foreign objectives and keep its people happy.
Biden should keep the pressure on China, and that means keeping the tariffs. The long-term goal should be to continue reducing U.S. imports from China, pushing U.S. firms to find other countries for their manufacturing. The more U.S. firms disengage with China, the harder it will be for China to mount a serious challenge to U.S. global dominance.
That objective will hurt some Americans. Consumers will likely pay higher prices, while U.S. companies that export to China should expect to see their sales curtailed in retaliation. Rather than give in to pressure, Biden should actively subsidize consumers and help producers find other markets. That won’t make the shift painless, but it would make the pain manageable as the United States protects the larger interests at stake.
Biden could reduce consumer pain by supporting a bill similar to that introduced by Sen. Tom Cotton (R-Ark.) in 2019. His Tariff Rebate Act would give the money raised by the tariffs back to taxpayers from the bottom three tax brackets (currently singles making $86,375 or less and married couples making $172,750 or less). That money could easily offset the higher prices these consumers are paying for Chinese goods, reducing or eliminating consumer pressure to knuckle under to Beijing. He could also provide relief for manufacturers paying higher prices on raw materials imported from China, provided they implement plans to find non-Chinese sources in the near future.
A comprehensive strategy could also help farmers. Trump gave farmers tens of billions of dollars to offset the loss of sales to China as that nation imposed retaliatory measures. Biden could and should continue these payments as part of a disengagement strategy. More helpful would be an effort to find other markets where farmers can sell their products. Australia did this last year after China imposed an 80 percent tariff on barley imported from Australia in retaliation for that nation’s support of a U.N. inquiry into the causes of the covid-19 virus breakout. Aussie farmers now sell that barley to the Middle East, Mexico and other Asian countries, helping make up for lost sales to China.
Thankfully, Biden has been tough on China so far. Keeping and perhaps raising the tariffs on Chinese imports will be an essential part of that policy for the foreseeable future.