Of course, within a few hours, it became clear that those initial reports had garbled what Biden had actually said. To be fair, Biden said, “We’re going after China in the wrong way.” But it was not at all clear he was interested in immediately lifting the tariffs.
As I was despairing about this on Twitter, my Bloggingheads partner-in-crime Heather Hurlburt lobbed a few questions in my general direction: “Explain to me why Biden should forego the possibility of using at least some of the Trump tariffs for leverage? Why would a president who’ll come into office with relatively little leverage give any away in advance?”
The hard-working staff here at Spoiler Alerts has several answers to this question, but the first one is also the simplest and strongest: The. Tariffs. Are. Not. Working. That was my conclusion last fall and Phil Levy’s conclusion this week: “The Trump administration appears to have made less progress than previous administrations in changing Chinese behavior, and at substantially greater cost.”
For leverage to matter, the other side must care enough to make policy concessions and trust that the deal will be kept. That has not really been the case here. There is minimal evidence that China is interested in altering its behavior to seek reduced U.S. tariffs. Instead, China has spent the past year or so finding ways to mitigate the costs of their imposition. Imposed on a unilateral basis by the Trump administration, they yielded little in the Phase 1 managed trade deal. Even Trump has said that there ain’t gonna be a Phase 2. In the end, all the trade war with China has accomplished has been to turn the U.S. agriculture sector into corporate welfare addicts.
Indeed, this was one of Biden’s criticisms last week when he said: “What we have done is we have disarmed ourselves. We make up 25 percent of the world’s economy. But we poked our finger in the eye of all of our allies out there.”
Unfortunately, the rest of Biden’s trade policies also leave something to be desired. Reason’s Eric Boehm notes, “The Biden campaign has published a trade policy platform that includes questionable ideas like a mandatory ‘Buy American’ provision that would increase what taxpayers have to pay when the federal government makes purchases.” As Gary Clyde Hufbauer and Euijin Jung of the Peterson Institute for International Economics recently explained, however:
When presidential candidates agree, the policy must be a political winner. Nevertheless, “Buy American” or “Made in America” as a slogan for excluding imports is an economic loser. We calculate that the annual taxpayer cost for each US job arguably “saved” by Made in America probably exceeds $250,000. We put “saved” in quotation marks because buy national requirements essentially shuffle jobs from other sectors of the economy to the procurement sector. And the shuffling takes a toll on economic efficiency, which shows up in elevated price tags on everything from computers to bridges. On balance, buy national requirements create no new jobs, but they do save jobs in domestic firms that supply government needs, often at a high cost to taxpayers.
To be fair, there might be instances in which economic efficiency is worth sacrificing for larger foreign policy goals. As I type this, China seems bound and determined to arrest everyone in Hong Kong while continuing to repress the Uighurs. A foreign policy that promoted economic statecraft designed to contain and alter China’s regime would not be an abominable approach.
That said, anyone who advocates for such an approach would also need to ensure that there is a multilateral component to it because otherwise it is doomed to fail. Already the Trump administration’s efforts to constrain Huawei are disproportionately affecting U.S. firms.
If I were Biden’s adviser on China and trade, I would advise him to remove all tariffs imposed since mid-2018 while keeping most of the national security measures in place. Think of it as a strategic pause that offers China a chance to detour away from the New Cold War Superhighway.
At the same time, I would strongly recommend the Biden administration reengage with the World Trade Organization, get the Appellate Body functioning again and patch up U.S. ties with its allies. This would include removing self-defeating steel and aluminum tariffs. Lay the groundwork for a coordinated, multilateral approach to China if Beijing continues to pursue the course it is pursuing.
Liberal Democrats are fond of pointing out that the United States should extricate itself from costly, pointless wars overseas. The Trump administration’s trade war with China has been an unmitigated disaster for U.S. foreign policy and the U.S. economy. If ever there was a war to discontinue, this one is it.