Punish China, create US jobs: trade envoy defends Joe Biden’s retention of Donald Trump-era tariffs

Katherine Tai sees ‘strategic value’ in duties while bolstering American middle class and reinvigorating stateside manufacturing and domestic economy
Tariffs and laws championed by Biden administration touted amid creation of ‘close to a million’ manufacturing jobs since 2021

US-China relations

Robert Delaneyin Washington

Published: 5:31am, 13 Feb 2024

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Joe Biden’s top trade official on Monday defended the administration’s decision to leave in place punitive tariffs on imports from China, arguing they have complemented other efforts by the US president to boost the number of domestic manufacturing jobs.

When asked about a recent study suggesting tariffs did not yield such employment, US Trade Representative Katherine Tai said the extra duties on Chinese goods enacted by former president Donald Trump plus tariffs he slapped on steel and aluminium imports more broadly had helped bolster the Biden administration’s job-creation initiatives.

“We have kept a lot of the tariffs because we see strategic value in those tariffs in this exercise of building out the middle class and reinvigorating American manufacturing and the American economy” Tai said at the Council on Foreign Relations during a discussion with former USTR Michael Froman.

The tariffs have had more of an impact since the enactment of three laws championed by the Biden administration – the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the Chips and Science Act – she added, saying “close to a million” manufacturing jobs had been created since Biden took office.

Data from the US Bureau of Labour Statistics showed that manufacturing employment increased by more than 750,000 positions since Biden became president in January 2021.

“When taken together, I would welcome anyone to do a study and look at all of these working in concert and how they have made changes to the US economy,” Tai said.

“You have to be looking at all these policy vectors as combined. Picking and choosing them really does trade policy as part of the economic policy family a significant injustice.”

The Inflation Reduction Act and the Chips and Science Act poured billions of dollars into America’s alternative energy and semiconductor industries to reduce dependence on China – moves that some analysts have characterised as a new industrial policy.

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The Chips Act alone appropriated US$52 billion in federal incentives to support the immediate need to onshore advanced chip manufacturing.

The study Tai was asked about when she was challenged about the utility of the Trump-era tariffs was written by David Autor of the Massachusetts Institute of Technology, Anne Beck of the World Bank, Gordon Hanson of the Harvard Kennedy School and David Dorn of the University of Zurich and published last month.

“Buyers facing tariff-induced price increases on Chinese imports may have found alternative sources of foreign imports, rather than purchasing a larger quantity of goods from domestic tariff-protected industries that could spur domestic employment growth,” the authors found.

“Other countries substantially expanded their exports to the United States,” they said. “The same was not true for US exports, as industries facing retaliatory tariffs struggled to expand sales in other export markets.

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“The net effect of import tariffs, retaliatory tariffs and farm subsidies on employment in locations exposed to the trade war was at best a wash, and it may have been mildly negative,” the study said.

To reach its conclusion of a possible net loss caused by Trump’s tariffs, the authors factored in subsidies worth more than US$20 billion that the Trump administration backed to offset retaliatory tariffs that China slapped on US agricultural goods.

The Chinese government targeted American soybeans – the largest US agricultural commodity export to China in terms of value – among other farm products, in the first round of tariffs after Trump imposed punitive duties on Chinese goods in July 2018, and buyers there turned increasingly to Brazilian suppliers.

A year later, in response to additional tariffs enacted by Trump on imports from China, Beijing temporarily suspended purchases of US agricultural products.