Why Biden is keeping Trump’s China tariffs in place
After months of escalation, Trump and Chinese President Xi Jinping came to a truce at the beginning of 2020, signing what’s known as the Phase One agreement. It reduced the rate of some of the tariffs, but left them in place, and China agreed to increase its purchases of US goods and agricultural products — setting an ambitious target of buying $200 billion more than it did before the trade war began.
Biden suggested recently that’s the reason he’s leaving the tariffs in place, despite pressure from the American business community to remove them as companies struggle with inflation and supply chain disruptions. US importers have paid nearly $123 billion to cover the cost of the China tariffs since 2018, according to US Customs and Border Protection.
“I’d like to be able to be in a position where I can say they’re meeting the commitments, or more of their commitments, and be able to lift some of it. But we’re not there yet,” he added.
China falls short of Phase One commitments
Under the terms of the deal, China committed to ramp up its purchases of US goods and agricultural projects, setting specific amounts for different categories to be bought over the next two years.
While China is importing more from the United States than it did before the tariffs were put in place, it has fallen short of its commitments.
Exports of US-manufactured goods, including aircraft and autos, have yet to recover to pre-trade-war levels. China has come closer to meeting its pledge when it comes to US agricultural exports, increasing its purchases of soybeans, wheat and corn. Those exports came to a near standstill in 2018.
But the Phase One agreement doesn’t dictate any repercussions in the event that China misses its goals. It’s up to Biden to decide whether to keep the tariffs in place.
Biden faces pressure from the business community
“It’s never been a good time for these tariffs, and now is a particularly bad time for them,” said Steve Lamar, president and CEO of the American Apparel and Footwear Association.
The new year is “really a continuation of the worst of the problems we’ve seen,” Lamar added, noting that supply chain disruptions are still causing shipping delays, some holiday goods still haven’t arrived on store shelves, and the Omicron variant of the coronavirus caused some factories and retail stores to temporarily close.
Biden moves ‘slow’ on trade policy
At the start of Biden’s tenure, a large part of his focus was on domestic policy, successfully pushing an economic pandemic relief bill and eventually an infrastructure investment package through Congress.
The Biden administration also announced in October that it would reinstate some China tariff waivers that US importers had previously received. The process to apply for a reinstatement of expired waivers launched in the fall, but the requests are still under review. More than 2,000 exclusions were granted under the Trump administration but only 549 are eligible for another extension.
Meanwhile, Congress allowed two longstanding trade programs to expire at the end of 2020 — effectively raising tariffs on a range of goods from various countries. Legislation has been introduced to renew the programs, but has yet to pass both chambers of Congress.
“When it comes to trade policy, the administration is moving very slowly,” Lamar said.
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