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The Damaging Consequences of US-China Tariff Wars



In recent years, American politics has been entangled in a narrative of fear and suspicion surrounding China - a narrative perpetuated by successive administrations, characterized by speculation and hysteria, and resulting in counterproductive protectionist policies.


The latest move by the Joe Biden administration to impose steep tariffs on Chinese imports, including electric vehicle (EV) batteries, computer chips, and medical products, is just another chapter in this ongoing saga.

 

Tariffs inherently protect domestic industries at the expense of consumers. When tariffs are imposed, they artificially inflate the prices of imported goods, making them more expensive for consumers. This not only diminishes consumer purchasing power but also limits choices in the marketplace. Unfortunately, the burden of these higher prices falls squarely on domestic consumers, while politically connected firms reap the benefits.

 

Take, for instance, American automotive manufacturers and their unions. While they may argue for protection from foreign competition, the reality is that tariffs hinder competition and innovation. Consider BYD’s Seagull - an electric vehicle that sells for about $10,000. Such disruptive products could revolutionize the market, but protectionist policies stifle their potential impact.

 

Despite Joe Biden’s previous criticism of Donald Trump’s protectionist policies during his 2020 campaign, his administration has continued down a similar path. As election season ramps up, the new tariffs announced by Biden’s team double, triple, and even quadruple the levies on Chinese imports. These actions are part of a broader trend of anti-China legislation.

 

The 2018 China-US trade war serves as a cautionary tale. Washington imposed tariffs on various Chinese exports, intending to bolster American industries and punish foreign exporters. However, the Chinese retaliated, and the economic evidence shows that American firms and consumers bore the brunt of these tariffs. Studies examining tariffs on washing machines, solar panels, aluminum, steel, and goods from China and the European Union revealed billions of dollars in annual losses for the US economy.

 

The Trump-Biden tariffs have bypassed congressional approval, with funding for programs like the Market Facilitation Program coming from the Credit Commodity Corporation. Unfortunately, this unprecedented use of government funds lacked proper oversight, leading to millions of dollars being sent to farms improperly.

 

While the newly announced tariffs may not immediately trigger a full-scale trade war, the situation remains precarious. Biden’s strategic approach - targeting key industries like clean energy and semiconductors - aims to address specific national security concerns without provoking an all-out conflict. However, next year’s outlook remains uncertain.

 

Cooperation, not escalation, should be the guiding principle. Rather than perpetuating the destructive retaliatory cycle, both nations should seek common ground. Collaborating on clean energy, technology, and healthcare can benefit not only the US and China but also the global community. 

 

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