Tariffs for US-China trade wars have hurt US industries and workers

In the face of high inflation and rising prices, the Biden administration announced that it is considering cutting its current tariffs on Chinese imports to ease inflationary pressures. Indeed, the tariffs have harmed both US industry and workers. Another consequence of the US-imposed tariffs is that they invited retaliatory tariffs, mainly from China, on US exports. Retaliatory tariffs have further hurt US businesses and workers, with certain regions and industries bearing the brunt of the consequences.

The Biden administration’s reevaluation of tariffs on Chinese imports comes as the first tranche of Section 301 tariffs on $34 billion worth of goods expires on July 6. Another $16 billion tranche will mature on August 23 and a third at about $100 billion on September 4. The expiration dates are due to the four-year term on the rates under Article 301, after which the rates will expire unless a review leads to an extension. Whether the Biden administration will extend the tariffs, change the tariffs or let them expire after the review by the United States Trade Representative (USTR) remains unknown.

In all, China targeted its retaliatory tariffs on agricultural and seafood products, and although tariffs on auto exports were imposed for a short period of time, they were lifted and not reintroduced. Since China represents the largest US agricultural export market, a large percentage of agricultural products, including soybean and pork exports, were targeted by the retaliatory tariffs. Across all retaliatory tariffs (including retaliation from other jurisdictions), 8.7 percent ($134 billion) of U.S. exports were the target of retaliatory tariffs, including $30 billion worth of agricultural products.

For example, in response to US-imposed tariffs on washing machines and solar panels, China imposed tariffs of 179 percent on US sorghum exports, resulting in an immediate shutdown of shipments and damage to US industry. While sorghum tariffs were immediately abolished, tariffs on other billion-dollar exports remain as part of the escalated trade war. In response to U.S. Section 301 tariffs targeting $350 billion in Chinese imports, China has imposed tariffs on more than $100 billion in U.S. exports ranging from 2.5 to 25 percent, and in response to Section 232- tariffs, China has imposed tariffs on $2.5 billion in US exports ranging from 15 to 25 percent.

A study by the U.S. Department of Agriculture found that the retaliatory tariffs cut U.S. agricultural exports by $27 billion from mid-2018, when the tariffs were imposed through the end of 2019. Soybeans in particular were responsible for most of the decline, at 71 percent. by sorghum and pork. The losses were mainly concentrated in states that exported the products, such as Iowa and Kansas. As a result of the tariffs, the US lost market share to Brazil, increasing agricultural exports to China by $8 billion in 2018. Another analysis that showed in total was that the US lost nearly $16 billion in trade with retaliatory nations in the agricultural market alone. †

As part of the Phase 1 US-China deal, China agreed to purchase nearly $40 billion worth of US agricultural products in 2020 and 2021, halve its retaliatory tariffs and exempt a variety of agricultural and energy products from the retaliatory tariffs. . Following the waivers, U.S. exports of the affected goods to China recovered significantly, from a low of 16 percent of market share in 2019 to 26 percent from March 2020 to February 2021. While market share remains below 2017 levels, the U.S. exports to China probably would have increased more had it not been for the COVID-19 pandemic.

Auto exports were also impacted by retaliation tariffs. Using provincial-level data, economist Michael Waugh found that a one percentage point increase in exposure to China’s retaliation rates led to a one percentage point drop in auto sales through 2018. He also found some spillovers to other markets: nationwide employment fell due to exposure to retaliatory measures. Affected companies have reconfigured their supply chains and laid off employees. Affected workers will reduce their spending elsewhere in the local economy, leading to negative impacts across the country. Another analysis found that auto exports had still not recovered by the end of 2020, despite China’s purchase commitments in the Phase One agreement.

Looking at the overall economic impact, Pablo Fahjelbaum and his co-authors found that the retaliatory tariffs caused total U.S. exports to fall by 9.9 percent, decreasing U.S. GDP by 0.04 percent. Mary Amiti and her co-authors similarly identified a major negative effect of the retaliation rates. Their analysis found that a 10 percent hike in tariffs reduced the value of U.S. exports by $32 billion, costing U.S. companies about $2.4 billion a month in lost exports. Both the quantities and prices of exports fell as an analysis showed that export prices had fallen by almost 50 percent after one year. Instead of passing the rates on to Chinese consumers, most US companies simply bore the costs.

The trade war has produced no tangible benefits for American companies and workers. While the US tariffs were intended to protect US industries, they have largely harmed the US economy. And they encouraged foreign countries to retaliate with their own tariffs, which have hurt the economy even more. The Biden administration should help US industries and workers by ending the US-China trade war.

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