China’s war games around Taiwan have prompted Biden administration officials to change their thinking on whether to abolish some tariffs or possibly place others on Beijing, or dismiss those options, according to sources with knowledge of the matter.
President Joe Biden’s team has been struggling for months seeking several ways to reduce the costs of tariffs imposed on Chinese imports during former president Donald Trump’s tenure, as it tries to curb soaring inflation.
It has examined a combination of scrapping some tariffs, initiating a new “Section 301” investigation into possible areas for further tariffs, and growing a list of tariff exclusions to assist U.S. companies that can only obtain certain supplies from China.
Biden has not resolved the issue and all options are still on the table, the White House said.
The tariffs make China imports more costly for U.S. companies, which, as a result, make products cost more for consumers. Taming inflation is a major goal for Biden, a Democrat, prior to the November midterm elections, which could change control of one or both houses of Congress to Republicans.
But, Beijing’s response to U.S. House Speaker Nancy Pelosi’s visit last week to Taiwan sparked a recalculation by administration officials, who are keen not to do anything that could be deemed by China as an escalation while also attempting to abstain from being seen as withdrawing in the face of the communist country’ aggression.
China’s military for days engaged in wrathful missile launches and replicated attacks on the self-ruled island of Taiwan that China claims as its own.
“I think Taiwan has changed everything,” said one source conversant with the most recent developments in the process, details of which have not been previously revealed.
White House spokesperson Saloni Sharma stated:
“The president had not made a decision before events in the Taiwan Strait and has still not made a decision, period. Nothing has been shelved or put on hold, and all options remain on the table. The only person who will make the decision is the president – and he will do so based on what is in our interests.”
Queried why a decision was taking that long, Commerce Secretary Gina Raimondo cited the complicated geopolitical situation.
She said in an interview with Bloomberg TV:
“After Speaker Pelosi’s visit to Taiwan, it’s particularly complicated. So the president is weighing his options. He is very cautious. He wants to make sure that we don’t do anything which would hurt American labor and American workers.”
With the most aggressive measures related to tariff relief and tariff escalation mostly on the back burner currently, the spotlight is on the so-called exclusions list.
The Trump administration had allowed tariff exclusions for over 2,200 import categories, including many essential industrial components and chemicals, but those lapsed as Biden assumed office in January last year. U.S. Trade Representative Katherine Tai has restored only 352 of them. Industry groups and more than 140 U.S. lawmakers have advised her to significantly raise the numbers.
The Biden leadership’s next steps could have a huge impact on hundreds of billions of dollars of trade between the world’s two biggest economies.
U.S. industries from automotive and aerospace to consumer electronics and retailers have been pushing for Biden to abolish the tariffs of up to 25% as they grapple with escalating costs and tight supplies. The tariffs were placed in 2018 and 2019 by Trump on thousands of Chinese imports estimated then at $370 billion to press China over its supposed theft of U.S. intellectual property.
Some senior administration officials, including Treasury Secretary Janet Yellen, had stated the tariffs were placed on “non-strategic” consumer goods that had unessentially increased costs for businesses and consumers, and eliminating them could help subside uncontrollable inflation. Tai stated the tariffs were “significant leverage” that should be used to pressure China for changes to its behavior.
Several factors, as well as China’s Taiwan response, have made the administration’s deliberations difficult. As U.S. officials think about abolishing some of the tariffs, they requested reciprocal rollbacks from Beijing and were rejected, two sources said.
One of the sources, who said a unilateral removal of some U.S. tariffs on Chinese imports has been delayed, said this was done in part as China did not display any readiness to consider reciprocal actions or meet its “Phase 1” trade deal commitments.
A spokesperson for the Chinese embassy in Washington said economic and trade relations between the two countries encountered “severe” challenges.
Liu Pengyu said in an email to Reuters:
“The (Pelosi) visit has undermined the political foundation of the China-US relations and will inevitably cause major disruption to the exchanges and cooperation between the two sides.”
The trade deal made it to the end of 2019 with the Trump administration, necessitated China to boost its purchases of U.S. manufactured and farm goods, services, and energy by $200 billion in 2021 and 2021 over 2017 levels. China greatly failed to meet these commitments, which comprised a $77.7 billion two-year increase in imports of U.S. manufactured goods, including machinery, aircraft, vehicles, and pharmaceuticals.
The Peterson Institute for International Economics evaluates that China successfully bought none of the extra goods it pledged. Beijing condemned the COVID-19 pandemic, which started just as the deal was made in January 2021.
The U.S. Trade Representative’s office is currently amid a statutory four-year evaluation of the tariffs placed by Trump, which could take several more months to finalize. Final public comments on whether to maintain them are expected by Aug. 23.
Union groups managed by the United Steelworkers have advised USTR to maintain the tariffs on Chinese goods to help “level the playing field” for workers in the United States and lower U.S. reliance on Chinese suppliers.
Biden has been worried about rolling back tariffs partially because of labor, which is a major constituency for him, and since China’s failure to purchase the products it had accepted to buy, according to the first source. The White House has refused to give a timeline for when a final decision will be reached.