Biden Imposes Major Tariffs On China

(Scypre.com) – In a recent move by the Biden administration, a new series of tariffs have been introduced, targeting Chinese exports that are considered crucial to U.S. national security. This announcement on Tuesday marks a significant shift in the U.S. trade policy, echoing measures previously seen under the Trump administration.

These newly imposed tariffs are valued at approximately $18 billion and are expected to have a relatively minor impact on the U.S. economy in the near term, concerning GDP, inflation, and monetary policy. Economists have described this impact as negligible, likening it to a “rounding error.”

Economist Joe Brusuelas from RSM US characterized the situation as the onset of a “long, cold winter of economic conflict between the U.S. and China,” a sentiment reflecting the gravity of the geopolitical tensions brewing between the two superpowers. This new tariff regime builds on the expansive $300 billion tariff program initiated by former President Donald Trump, which remains in effect and has broadly targeted Chinese goods along with those from various other trading partners.

Trump’s rhetoric on the campaign trail has suggested even more aggressive tariff policies, proposing a blanket 10% tariff on all imports, which economists warn could lead to significant job losses and inflation spikes in the U.S.

The economic landscape surrounding these latest tariffs includes a robust job market, strong consumer spending, and ongoing high inflation rates that have prompted the Federal Reserve to maintain elevated interest rates. According to Ryan Sweet, chief U.S. economist at Oxford Economics, the impact of Biden’s tariff plan on monetary policy is expected to be minimal. “The Fed will not make a mountain out of a mole hill, so the tariffs will not provide additional ammunition to justify keeping interest rates high for longer,” Sweet mentioned in a note.

Historically, tariffs have had mixed outcomes on domestic manufacturing. For instance, the steel and aluminum tariffs imposed by President George W. Bush in 2002 led to higher industry prices and significant job losses, particularly among smaller firms. Conversely, President Barack Obama’s tariffs on Chinese tire imports in 2009 were credited with saving around 1,200 jobs in the U.S. tire industry but resulted in consumers facing over $1.1 billion in increased costs.

Trump’s 2018 tariffs did not yield the intended boost in manufacturing employment; rather, they resulted in job losses and higher consumer prices due to increased production costs and retaliatory tariffs. A 2019 study by Federal Reserve economists highlighted these unintended consequences.

Regarding consumer costs, tariffs generally translate to higher expenses for U.S. distributors, retailers, and ultimately, consumers. The U.S. International Trade Commission’s 2023 study found that U.S. importers absorbed almost the entire cost of Trump’s tariffs. Additionally, some businesses exploited the trade tensions to further increase prices, as noted by Goldman Sachs and the New York Fed.

Long-term economic effects of tariffs remain ambiguous, with recent studies suggesting that their net impact may be negligible or slightly negative in terms of jobs and business performance. The political ramifications, however, have been more pronounced. Tariff-affected communities have shown increased support for the Republican party, a shift that was documented in a working paper by the National Bureau of Economic Research in January 2024.

The Covid-19 pandemic further complicated the landscape, distorting traditional trade patterns and supply chain dynamics. After initial declines in Chinese imports due to tariffs, the pandemic-induced surge in U.S. consumer demand led to a temporary rebound in imports from China. Yet, by the end of 2023, there was notable growth in imports from other Asian nations like South Korea, Singapore, Taiwan, and Vietnam, as reported by Wells Fargo economist Nicole Cervi.

Additionally, recent freight data suggests potential tariff circumvention strategies, with significant increases in container shipments from China to Mexico, as per Xeneta’s analysis. This shift is indicative of the complex strategies businesses may employ to navigate the intricate web of international trade tariffs.

Overall, the economic and political landscape of U.S. tariff policy remains fraught with complexity and controversy, reflecting a delicate balance between protecting domestic industries and maintaining healthy global trade relations.