Whether it’s cars, high-end electronics, or groceries, nowadays, we want things cheap, and we want them now. It is hard to overstate the impact that the rise of e-commerce has had on consumers’ buying habits, and the fashion industry is no exception. The rise of so-called “fast fashion” brands feels like the natural progression of the digitalization of commerce. Yet, in the drive to reinvent the fashion industry and cut costs, Chinese e-commerce sites like SHEIN and Temu are engaging in unacceptable practices and, in many instances, outright abuses of human rights.

The United States and other Western countries should not sit idly by and allow products produced with forced labor to contaminate our markets. To that end, it is heartening to see a new bipartisan effort to investigate the practices of SHEIN, Temu, and other such companies. However, the Biden administration’s proposal to effectively eliminate the de minimis tariff exemptions for all Chinese products drives in a nail with a sledgehammer. Rather than using such a broad policy to address the human rights violations and improper trade practices of some firms, the Biden administration should use the tailored authority provided to it under the Uyghur Forced Labor Prevention Act (UFLPA) and address human rights abuses by Chinese firms on a case-by-case basis.

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As the market for fast fashion continues to grow, SHEIN and Temu have become household names in the United States, offering ultra-cheap, trendy apparel that appeals particularly to younger consumers. However, behind these rock-bottom prices and overnight delivery lies a disturbing truth—these companies routinely engage in human rights violations and flout American trade laws.

According to a recent interim report by the House Select Committee on the Chinese Communist Party, both brands have been implicated in the exploitation of forced labor in China’s Xinjiang region, where the ethnic Uyghur population endures systemic oppression, forced labor, and detention under the Chinese government. Temu, in particular, has virtually no systems to ensure that its supply chains are free from forced labor and that products comply with human rights and trade laws like the UFLPA. This not only raises serious ethical concerns but also puts U.S. consumers in a position where their purchases may indirectly fund and perpetuate genocide in Xinjiang.

With the evidence against SHEIN and Temu as damning as it is, the obvious question is how have these companies managed to get around the numerous U.S. laws that prevent the import and sale of products manufactured using forced labor? One way these companies get around U.S. trade law is through the de minimis exemption from tariffs and customs enforcement. By shipping products in quantities valued under $800, companies like SHEIN and Temu can avoid import duties and disclosure requirements and skirt U.S. trade laws.

This exemption was never intended to serve as a workaround for large-scale e-commerce operations to flood the market with cheap goods, let alone those produced under forced labor conditions. In fact, according to the White House, “the number of shipments entering the United States claiming the de minimis exemption has increased significantly, from approximately 140 million a year to over one billion a year” over the last decade. The majority of this increase comes from just a handful of Chinese e-commerce companies, including SHEIN and Temu.

The Blunt Instrument of Ending The De Minimis Exemption

In response to the human rights issues connected to SHEIN and Temu’s continued exploitation of the de minimis exemption, the Biden administration recently announced new rules to eliminate the exemption for most Chinese goods. This move presents a strong stand against Chinese exploitation of U.S. trade laws and its own people. However, as with any broad policy, the potential unintended consequences cannot be overlooked.

First, eliminating the de minimis exemption entirely may not effectively stop SHEIN, Temu, and other such companies from importing goods illegally produced with forced labor. As we have seen in the past, companies with the resources and motivation to bypass labor laws often find new ways to evade them. In spite of decades of global efforts to prevent it, imports of coffee from South America, cocoa from West Africa, and precious metals from the Congo are still regularly tainted with slave labor. Without more targeted enforcement, the broad elimination of the de minimis exemption might only incentivize these companies to adopt more sophisticated methods of avoidance while continuing to engage in unethical labor practices.

The ineffectiveness of eliminating the de minimis exemption would likely be exacerbated by the enfeebled state of Customs and Border Protection (CBP). As the “boots on the ground” at U.S. ports and border crossings, CBP is the primary agency charged with enforcing U.S. import and export laws. But, due in no small part to the challenges of patrolling the southern border, CBP resources are spread increasingly thin. By one tally, fully implementing the Biden administration’s proposal would require between $8 billion and $30 billion in additional annual funding for CBP and thousands of new officers for an agency already racked by workforce shortages. Without addressing these inherent problems at CBP, simply repealing the exemption is unlikely to achieve the goal of preventing the import of products manufactured using forced labor.

Second, ending the de minimis exemption for all Chinese imports would likely have a significant negative impact on U.S. consumers and businesses. Many small and medium-sized American companies rely on importing goods from China—legitimate products that have no connection to forced labor or human rights abuses. These businesses would be hit with higher costs and increased administrative burdens, leading to higher consumer prices and disruptions in supply chains, amounting to billions of dollars in welfare losses. Research has shown that changes to de minimis rules will most heavily impact lower-income consumers. At a time when inflation is still a concern and consumers are already grappling with high costs, this broad-stroke policy could backfire economically.

Third, the administration’s argument for removing the de minimis exemption perversely invokes national security concerns to protect domestic apparel and textile manufacturers. The administration’s press release concludes, claiming that removing the exemption is critical to protecting the American apparel and manufacturing sector because of its importance to the defense industrial base. Programs specifically designed to support and protect textile manufacturing for critical government needs already exist, so any attempt to bolster these capabilities should begin with an inventory of existing programs and their funding. Furthermore, since 2016, when new de minimis rules came into effect, American exports of fiber, textile, and apparel by value have largely remained steady and reached their highest levels in 2022 and 2023. Attempting to privilege domestic manufacturers under the guise of national security dilutes the importance of addressing improper trade practices and undermines U.S. action.

Finally, such a sweeping measure risks eroding public support for more tailored and effective solutions. There is broad bipartisan agreement on the need to combat forced labor and human rights abuses in China, particularly regarding the plight of the Uyghur people. However, a blanket policy that increases costs for American businesses and consumers related to goods that pose little to no national security risk could undermine future efforts to deter the CCP’s malign practices related to trade and intellectual property. Both the Trump and Biden administrations have rightly focused on addressing strategic weaknesses and security threats posed by Chinese control over advanced semiconductors, digital platforms, and critical minerals. Such moves were focused on addressing specific threats in a narrowly tailored fashion. The administration should take a similar approach to SHEIN and Temu.

A More Targeted Approach

Rather than deploying a one-size-fits-all solution, the Biden administration should leverage the existing authority granted by the UFLPA to address the specific problem posed by SHEIN, Temu, and other companies that rely on forced labor. The UFLPA already provides a robust legal framework to prevent goods produced with forced labor from entering the U.S. market, presuming that all goods from Xinjiang are tainted unless proven otherwise. However, enforcement of the law has been uneven, allowing companies like SHEIN and Temu to continue their operations with minimal disruption.

The administration should focus on strengthening the enforcement of the UFLPA by increasing inspections and audits of companies with ties to Xinjiang, particularly those in the fast fashion industry. By ramping up targeted enforcement efforts, the U.S. can more effectively block products made with forced labor from entering the market without resorting to broad measures that affect legitimate trade. Perhaps more importantly, since Congress has determined on a bipartisan basis that both SHEIN and Temu have facilitated forced labor in Xinjiang by creating a market for such products and contravening U.S. trade laws such as the UFLPA, the Biden administration should consider using its authority under Section 5 of the UFLPA to sanction SHEIN, Temu, and individuals known to have facilitated their actions.

The United States has a moral and strategic obligation to prevent the importation of goods produced with forced labor, particularly from regions like Xinjiang, where the Chinese government is perpetrating gross human rights abuses. While the Biden administration’s proposed elimination of the de minimis exemption for Chinese goods is well intended, it is a blunt instrument that risks harming U.S. consumers and businesses without addressing the root of the problem.

A more targeted approach, focusing on enforcing the Uyghur Forced Labor Prevention Act and closing specific loopholes in the de minimis exemption, would be a more effective way to combat forced labor and hold companies like SHEIN and Temu accountable. By adopting a measured and focused strategy, the U.S. can advocate for human rights without compromising its economic interests.

Joshua Levine is the manager of technology policy at the Foundation for American Innovation.

Luke Hogg is director of policy and outreach at the Foundation for American Innovation.

To read the blog as it was published on The National Interest webpage, click here.

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What explains the stark inconsistency between what the people say they want and what the Republicans and Democrats, and especially those who wear those party labels in elected and appointed office in Washington, seem determined to give them?

According to the national survey, 66 percent of Americans believe global trade is good for the American economy; 64 percent believe it has increased material abundance in their own lives by increasing the variety of the products they can buy; 58 percent say it has improved their standard of living; 63 percent want to increase trade with other nations; 57 percent say doing so is good for their communities; and 53 percent have a favorable view of free trade.

Seventy-five percent of Americans worry that tariffs are raising consumer prices. Two-thirds of them, 66 percent, would oppose paying even $10 more for a pair of blue jeans due to tariffs—even if those tariffs are meant to help US blue jean manufacturing. In addition, three-fourths, 75 percent, worry that special interest groups are lobbying the government to impose tariffs or other restrictions on trade.

Virtually none of this is reflected in the current trade policies of our major political parties. Under the thrall of Donald Trump, Republicans have largely abandoned their longstanding historical support of free trade. Likewise, the decades-long struggle between free traders and protectionists for ascendancy in the Democratic Party has apparently ended in triumph for anti-trade protectionists. Although some Democrats are hoping Kamala Harris would step back as president from the most trade-restrictive and trade rule-scoffing of the policies of President Joe Biden—which are basically the same as those followed while in office by former President Trump—these wistful hopes seem mainly to be founded on wishful thinking.

Instead of pursuing the generally pro-trade sentiments of most of the American people, as demonstrated in the Cato survey, Republicans and Democrats alike are headed in the opposite direction. Trump is doubling and tripling down as “Tariff Man” with ever-evolving proposals for higher and higher tariffs on worldwide imports. The Democrats have had a hard time keeping up with his tariff-happy tweets, but they, too, are imposing and promising more regressive taxes on the American people in the form of tariffs.

Neither party seems to think trade is good for the American economy, neither appears to want to increase trade, and neither is trying to conclude or is committed to concluding more international trade agreements. Worst of all, Republicans and Democrats are united in ignoring international laws on trade and in impeding and undermining the World Trade Organization and its rule-based trade dispute settlement system.

Why this disjunction between the two parties and most of the people on trade? Put simply, both parties have been captured by minorities with minority views. Neither party is representing the broadest measure of their membership or the broadest extent of the American people. Both are responding mostly to their political “base,” which ignores a lot of other Americans—more bodog poker review moderate and centrist members of both parties and the independent voters who comprise a growing portion of the American electorate and are likely to be more favorable to more trade.

The Pew Research Center has found that only six percent of Americans and 12 percent of Democrats are of the “progressive left,” which is leading the charge against trade within the Democratic Party. The Republican Party has been captured by Trump and other anti-trade tribunes of economic nationalism, but there remain millions of traditional Republicans who, though exiled from Republican decision-making, nevertheless are still within the American electorate. Moreover, Gallup polling shows that a record 49 percent of Americans “see themselves as politically independent—the same as the two parties put together.” These many millions of Americans have been pushed aside in the policymaking of American politics.

In all their policymaking, both parties are now pulled by their “base” to the extremes. Republicans are pulled to their political right, where trade protectionism and other manifestations of the economic nationalism of Donald Trump prevail. Democrats are pulled to their political left, where progressivism is increasingly equated with protectionism and other forms of economic nationalism. The embrace by both parties of different versions of an interventionist and trade-discriminatory industrial policy by the federal government is one consequence of this pull to the extremes. With trade and numerous other issues, the center is not holding in American politics because, except in periodic general elections, it is not present and so is not heard in policymaking.

In the US House of Representatives and in many state legislatures, this hollowing out of the American political center is a result of gerrymandering in drawing the lines of congressional and legislative districts, which empowers the political extremes at the expense of the political middle in the electorate. This gerrymandering by both parties diminishes the political legitimacy of our democratic republic while advancing minority views that are translated into policy, including in international trade. Meanwhile, the vast center of the American electorate is increasingly left unrepresented. Where both parties once competed to be responsive to the political center in the country, now they often seem to ignore it, especially in their legislative and executive decision-making.

Instead, as the voters surveyed by Cato rightly fear, policymakers and decision-makers who should be pursuing the public interest increasingly hear and heed the voices and the views of self-seeking private interests. In trade, this includes those labor unions with workers in trade-challenged declining industries in politically pivotal states, and threatened businesses in those industries in those states that cannot—or will not—meet the challenge of global competition and thus seek to be sheltered from such competition behind protectionist trade barriers. Because these key states, such as Pennsylvania, Michigan, and Wisconsin, are crucial to the outcome of presidential elections and to control of Congress, popular calls for more openness to trade from other sectors in other states go unanswered.

Among the quibbles and qualifications to the overall desire of most Americans for more trade, as evidenced by the Cato survey, is the fact that most Americans want to make certain that trade policy benefits Americans. A majority of Americans, 56 percent, support putting tariffs on goods from foreign countries if those countries impose restrictions on goods from the United States.

This support plummets, however, if these retaliatory tariffs increase domestic prices, decrease innovation and US business growth, or decrease jobs in other American companies that rely on the imports affected by the tariffs. Overall, 61 percent of Americans believe US businesses must “learn how to become strong and compete globally without any government handouts or taxpayer subsidies”. Despite this, both parties are increasingly addicted to subsidies and other handouts, including protectionist tariffs.

Another qualification to the support of most Americans for more trade is the question of trade with China. Few Americans—only 15 percent—think that China has acted fairly in trade with the United States. Not surprisingly, both parties have “get tougher” policies on trade with China. However, 81 percent of Americans surveyed by Cato overestimated the share of imports the United States receives from China. (The correct answer is about 15 to 16 percent.) If the broad middle of the American electorate were better heard in American policymaking, a more temperate—and less bellicose—view might be evidenced in policymaking on China trade, perhaps leading to mutually beneficial solutions that have eluded the two trading partners thus far.

Like the overall support of most Americans for trade, these and other nuances in this majority support are blurred in the broad brush of pure protectionism that is manifested more and more in the trade policies of both parties. Hence the widening gap between what the American government, and the politicians who populate it, are saying and doing on trade and what most Americans seek in trade.

On trade policy, those who are leading us, and those who would lead us, are not giving voice to the views of the majority of the American people who generally support trade. Unless this changes, the result will be an American economy and an American future smaller than what they would be if the majority views were heard and reflected in US trade policy.

To read the blog as it was published on the CATO Institute webpage, click here.

To view Cato Institute 2024 Trade and Globalization National Survey as posted by CATO click here

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Overcapacity in China’s green industries is now said by the United States and others to be a major problem in international trade. Subsidy and dumping practices are well defined in the WTO rulebook, which spells out remedies to compensate aggrieved producers. But ‘overcapacity’ has never been defined by the World Trade Organization, nor have remedial measures ever been articulated to deal with it.

In one sense, overcapacity could be said to characterise Swiss exports of financial services, French exports of champagne and US exports of civil aircraft. Yet overcapacity has become a negative buzzword solely with respect to China. An old complaint is China’s huge steel industry which accounts for about half of world production and about a quarter of world exports. More recently critics have pinned the label on China’s green industries — electric vehicles, batteries and solar panels. Chinese policies are denounced for encouraging plant investment far ahead of domestic demand, leading to exports at bargain prices and discouraging industries abroad.

The US Tariff Act of 1890 and the Antidumping Act of 1916 launched countervailing duties (CVD) and antidumping duties (ADD) — both additional import duties that aim to provide relief to affected domestic industries — on their way to becoming fixtures of world trade law.

Why do critics add overcapacity to the basket of unfair trade practices when CVD and ADD remedies are readily available, widely accepted, and could in principle address the unfair component of Chinese exports? The main reason for this is that only with careful analysis can the extent of subsidisation or dumping be determined and corresponding penalty duties be justified.

By contrast, once the ‘overcapacity’ label is invoked, no calculation is needed to justify a penalty duty. Since Chinese subsidies are often opaque, this is convenient. As US practice has shown, under Section 301 of the Trade Act of 1974, a penalty duty of any magnitude can be imposed against unfair trade practices, and the target importer has no effective recourse to the dysfunctional WTO dispute system.

US trade remedies under Section 301 were invoked long before Chinese overcapacity became an issue. Section 301 tariffs against China respond both to opaque subsidies and technology theft. Legal engineering has made current declarations of overcapacity equally immune to challenge as a finding of national security threat. The saga of penalty duties against Chinese exports of solar panels and electric vehicles illustrates the new landscape of trade remedies.

In December 2012, the US Department of Commerce (DOC) found subsidy rates for Chinese solar firms of around 15 per cent and assessed CVDs accordingly. In the same month, Commerce found dumping margins ranging between 18 and 29 per cent, depending on the Chinese solar firm, and assessed anti-dumping duties accordingly. While this combination of CVDs and ADDs curtailed solar imports from China, renewable energy demand was strong and China still remained the main supplier of solar panels. In fact, by 2023, China commanded 80 per cent of global solar capacity, and plant additions in 2024 were sufficient to satisfy all global demand through to 2032.

In June 2018, former president Donald Trump invoked Section 301 to impose 25 per cent tariffs on a large swath of Chinese exports, including solar panels. The new 25 per cent penalty tariff came on top of existing CVDs and ADDs. In May 2024, again invoking Section 301, US President Joseph Biden doubled the 25 per cent tariff on solar panels to 50 per cent. A predictable consequence of the overcapacity duties was the circumvention of Chinese solar exports through Cambodia, Malaysia, Thailand and Vietnam. US imports from those countries were in turn subject to high CVDs and ADDs.

The overcapacity charge went into overdrive for Chinese production of electric vehicles (EVs). In 2009, China surpassed the United States in auto production and became the world’s largest producer and within a few years the dominant maker of EVs. The European Union has long imposed a tariff of 10 per cent on imported cars. Nonetheless, fearing that good quality Chinese EVs would swamp the European auto market, the European Union investigated Chinese subsidies, finding a range between 17 per cent for Chinese manufacturer BYD up to 38 per cent for state-owned manufacturer SAIC. Corresponding CVDs were imposed in July 2024, on top of the standard 10 per cent tariff.

Across the Atlantic, in June 2018, US imports of Chinese autos were subject to Trump’s 25 per cent trade-war tariff. Rather than fuss with a subsidy inquiry, in May 2024 Biden deployed Section 301 to quadruple the auto tariff to 100 per cent. Biden also imposed a 25 per cent Section 301 tariff on EV battery imports, effective in August 2024. Trump immediately promised a 200 per cent tariff on EVs, whether made in China or Mexico.

If trade policy centred on consumer welfare, the United States and European Union would thank China for its inexpensive EV, battery and solar exports and their contribution to lowering carbon emissions. But trade policy has always offered a sympathetic ear to domestic firms. Not since the Great Depression of the 1930s has that sympathetic ear been more attuned than in today’s populist era.

Bringing discipline back into application of the global trade rules is an urgent but not an easy task.

Gary Clyde Hufbauer is a non-resident Senior Fellow at the Peterson Institute of International Economics. This article is part of a series from East Asia Forum (www.eastasiaforum.org) in the Crawford School of Public Policy in The Australian National University.

To read the full analysis as it was published on East Asia Forum, click here.

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One could choose to agree or disagree with either position, but the positions were clear and, more importantly, they were firm. In less than a decade, a seismic shift has occurred that not only creates ambiguity over economic policy but also narrows the distinction in party platform on matters of trade. The choice is no longer between open trade and trade protectionism, but rather between trade protectionism and … more trade protectionism.

Indeed, since the initiation of Washington’s trade war with China, U.S. consumers have been forced to dole out about $215 billion in extra costs associated with the duties importers have to pay. What started out as a strategic move by the Trump administration to renegotiate the terms of NAFTA quickly morphed into a series of protectionist escapades, including a 25% tariff on almost all goods coming in from China and a comparable tariff on imports of steel and aluminum.

These practices were maintained by the Biden Administration. In addition, Congress allowed the Generalized System of Preferences (GSP) – a program that offered preferential duty to developing nations – to expire during the final days of the Trump administration. Since then, there has been tepid impetus by members of Congress on either side of the aisle to resurrect the program. In addition, a host of non-tariff barriers have been imposed by the current government in the form of various safety checks, domestic production quotas and barriers to entry in the U.S. market. Not only did the Biden administration choose not to reverse the Section 301 tariffs against China, but recently it doubled down on them by multiplying the rate as much as four times on some items and allowing pre-existing exceptions to the tariffs to expire.

Refusing to allow itself to be outdone, the Trump campaign has suggested imposing even more tariff barriers in the form of a universal 10% tariff on all imports irrespective bodog online casino of origin and using far broader strokes of tariff increases on goods coming in from China.

As noted above, these extra costs are summarily passed along to consumers who bear the brunt of these protectionist practices. But for each action, there is an equal and opposite reaction. America’s trading partners have expectedly reciprocated with tariffs of their own, making U.S. goods more expensive abroad. The outcome has been a meteoric rise in tariff barriers globally. In 2018, the first full year of the U.S.-China trade war, there were about 750 trade barriers on merchandise goods. In 2022, there were just shy of 3,000. That means it’s much more expensive to do business globally, which is precisely the effect the protectionists are looking to generate: Do more business domestically; less globally.

But there are still thousands of U.S. based businesses that source critical supply inputs from overseas providers. Many of these businesses are also looking to court consumers in international markets. What are these global businesses to do when policymakers in Washington continue to enact legislation and put forward policies that create barriers to trade?

Diversification

Much has been written to date about the virtues of trade diversification. Whether it’s the China+1 strategy, nearshoring, re-shoring, friend-shoring or something entirely different, U.S.-based businesses have awoken to the fact that the status quo is no longer a valid option. A 2024 report by the American Chamber of Commerce in China shows 50% of respondents intend not to expand investment or scale back investment with 12% looking to shift investment outside the country. That’s not surprising given that only 19% stated their EBITDA in China was higher than it was globally, down from 26% before the pandemic.

But divesting from China in favor of greener pastures isn’t clear cut. There are critical questions to be asked about the nature of the product and production process, the time sensitivity around getting product to end markets and the rules, regulations, taxes and tariffs that are going to impact landed costs for imported goods. Take for example Vietnam. Once a beacon of hope for product manufacturers looking to hedge their bets against China in the wake of the pandemic’s production shutdowns, Vietnam is beginning to look increasingly risky. The country’s political leadership has become unstable after a corruption purge saw an exit of the most likely successors to its aging leader. Moreover, Vietnam’s sudden spike in exports to the U.S. has put it on the radar of the United States Trade Representative, the Department of Commerce and U.S. Customs and Border Protection as a potential point of transhipment and circumvention of Section 301 duties and anti-forced labor legislation.

India too has been a darling of the diversification crowd. With its high-skilled labor it quickly became the choice alternative to China for hi-tech manufacturing, particularly consumer electronics goods. But its political stability is also beginning to show cracks in the aftermath of a recent election in which the ruling party saw its support slip significantly.

The Critical Questions

For corporate decision makers, knowing where to direct their investment dollars can often be a game of chance. The trick to success isn’t finding a single alternative, but multiple. Strategically setting up production in multiple locations that offer the ability to scale up or down to meet the needs of the business. To do this successfully, however, critical questions must be asked that go beyond production capacity. For example:

• Is the skill of the workforce commensurate with the requirements of production?
• Is the country’s road, energy and port infrastructure able to support a spike in volumes?
• Is there political, geopolitical, geographic or climatic risk?
• Does the country have free trade agreements with industrialized nations that allow you to integrate production through free trade zones or free trade agreements.
• Is there risk of a trade war or trade barriers between this country and the end market?
• Is there flexibility in modes of transport (e.g., can you ship via air instead of ocean, if necessary)?

This is by no means an exhaustive list, but it does offer a snapshot of often overlooked considerations. The reference to political risk is particularly critical in the lead up to the 2024 U.S. presidential election where both parties find themselves looking to score points with voters who are increasingly wary of globalism and celebrate reversion to domestication and self-sufficiency. As popular as that concept might be today, its long-term implications may be quite the opposite of what those voters might expect. The International Monetary Fund estimates the spike in trade barriers will ultimately result in a 7% decline or $7.4 trillion dollars in global economic output. In the U.S. specifically, the Tax Foundation estimates the China tariffs will shave 0.21% off GDP and eliminate about 160,000 jobs. Still, politics is a game of emotion, not numbers. And gauging how policy will be shaped by policymakers is never a precise science.

Some U.S. importers hoped Chinese companies setting up shop in Mexico could help them circumvent Section 301 tariffs and also take advantage of duty exemption through the United States-Mexico-Canada Agreement (USMCA). But the recent tariffs being imposed on Chinese EVs coming into the U.S. from Mexico may be a harbinger of more to come. And within days of those tariffs being put in place, the European Union followed suit with the same tariff policy on Chinese EVs. Canada is anticipated to be next in line.

Tariff Engineering

Often likened with “creative accounting” tariff engineering is frequently misinterpreted as a not-so-ethical practice. In reality, there’s nothing inherently wrong with it and many companies employ tariff engineering as a means of reducing their duty spend and optimizing their supply chains.

For the uninitiated, tariff engineering is a process by which a company that sources its product components from multiple points of origin and transports those components elsewhere for final manufacturing, shifts the form of each component to avoid paying more in duty than necessary. For example, a sandal manufacturer might source its leather, rubber and foam cushioning from three different countries and import all products into Vietnam for final production. Vietnam might have a 10% duty on each of these materials individually but might have only a 5% duty on a finished sandal sole and a 3% duty on a finished sandal strap (versus the unfinished leather). In this case, it might make more sense for the manufacturer to assemble the sole of the sandal at one point of origin before importing it into Vietnam, and similarly finishing the strap at another point of origin before import. The result is fewer dollars spent on transport, a reduction in customs paperwork and reduced spend on customs duties. Now multiply that sandal by a million units and the cost-savings potential becomes clear.

Yet, few companies have the capacity or expertise to calculate the various scenarios for duty costs when configuring their supply chains, resulting in overspend. In today’s world, time taken to make these calculations as part of a broader computation on landed costs can have meaningful impact to balance sheets. The trick is doing the calculations correctly and ensuring the products are classified correctly (a practice that is often treated with a degree of apathy until it’s too late).

Doing the math on tariffs and duty spend and running multiple scenarios allows companies to develop practical contingencies that can respond to likely or foreseeable shifts in trade and regulatory policies and coincides neatly with the diversification practices noted above.

No Panacea

For U.S. importers with overseas interests looking for a cure-all remedy to the disruption caused by America’s recent rejection of globalism, the bad news is there isn’t one. That isn’t alarmism or fatalism, it’s unvarnished truth. Every industry and every product will require its own solution because every country places varying degrees of protection against products depending on what serves the political and economic interests of that country. The ideal diversification model for an apparel company is likely never to mimic that of a smartphone maker, which will vary wildly from that of a pesticide producer. Each must evaluate its own production models with careful attention to existing and future costs, risks and, most importantly, agility.

With the outcome of the upcoming election still very much up in the air, and increasingly populist rhetoric from both candidates on the issue of trade, it’s anyone’s guess what the trade landscape might look like a year from now. As any business decision maker knows all too well, it’s what you don’t know that will hurt you. That’s why hedging bets and avoiding too much dependence on any one source or market may very well become the new normal for international businesses.

In the interim, the chess board of global trade is all set up to play. The next move is corporate America’s.

Jill Hurley is Senior Director of Global Trade Consulting at Livingston. As the practice leader, she spearheads U.S. import and export projects, offering comprehensive reviews of clients’ business models for risk assessment, crafting, and implementing import/export compliance programs, conducting audits, navigating export licensing requirements, and providing support in U.S. trade remedy matters.

To read the full article as it was published on Livingston, click here.

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It is hard to think of an issue that brings together the United States’ deeply divided political class more than the need to contain China’s growing influence, whether through trade restrictions, tariffs on Chinese electric vehicles (EVs), or banning TikTok. But while the national-security argument for such protectionist measures is undeniably compelling, it is unclear whether US political leaders and the American public are prepared for the potential economic fallout.

The prevailing belief among policymakers is that the surge of Chinese imports into the US market during the 2000s hollowed out America’s manufacturing base, making the kind of rapid military build-up that enabled the Allies to win World War II all but impossible. In US policy circles, the “China Shock” is often portrayed as a massive error that devastated towns across the Rust Belt and led to a sharp increase in inequality.

Consequently, there is widespread agreement among policymakers and commentators that the US must prevent a “China Shock 2.0” by imposing massive tariffs and trade restrictions on Chinese technologies such as cell phones, drones, and, crucially, EVs, solar panels, and green-energy equipment. President Joe Biden and his predecessor, Donald Trump, the presumptive Republican nominee in November’s presidential election, disagree on most issues. When it comes to dealing with China, however, both appear to be competing for the title of America’s most protectionist president.

But the China Shock narrative that underpins current US trade policy is deeply flawed. While competition with Chinese producers has adversely affected some manufacturing jobs, free trade has undoubtedly created more winners than losers. Moreover, low-income US consumers have been among the biggest beneficiaries of low-cost Chinese imports. Policymakers who believe that unwinding trade with China will not result in price increases and significant political backlash are in for a rude awakening.

To be sure, the economic impact of US trade restrictions could be minimized by rerouting Chinese imports through third-country suppliers, enabling Americans to buy Chinese-made solar panels as though they were produced in India, albeit at a higher price. But while this tariff theater may be popular with voters, it is hard to see how this would improve national security any more than rerouting Chinese fentanyl into the US through Mexico helped solve the opioid crisis.

Moreover, it would take years for “friendlier” countries to develop their own manufacturing bases that can compete with China’s, especially at the low prices offered by Chinese producers. In some sectors like EVs, China’s production capacity has given it an almost insurmountable lead over Western countries. Given this reality, the United Auto Workers’ goal of having Americans buy electric cars produced in high-wage, unionized US facilities will be extremely difficult to achieve, no matter how much Biden or Trump may support it.

A more targeted approach would ideally distinguish between trade involving sensitive military technologies and other goods, but doing so is more complicated than many seem to realize. The convergence of military and civilian technologies has become painfully apparent during the Russia-Ukraine war, with low-cost drones originally designed for carrying packages being repurposed as bombers and private mobile networks playing a pivotal role in major battles. Additionally, as the COVID-19 pandemic has shown, the US and its allies depend on Chinese medical supplies.

For those of us who believe that multilateral cooperation is necessary to address the world’s most pressing problems, from climate change to regulating artificial intelligence, the escalating rivalry between the world’s two major powers is deeply troubling. From the US perspective, China’s authoritarian government undermines the foundational liberal values that underpin the global economic and political order. China’s relentless cyberattacks continue to pose an immediate threat to the US economy and American companies, and a potential Chinese blockade or invasion of Taiwan would have far-reaching global consequences.

From China’s perspective, the US and its allies are cynically trying to maintain a world order established through centuries of European and American imperialism. Much to the chagrin of US diplomats, many other countries appear to share this sentiment, as evidenced by the widespread disregard among developing and emerging economies for Western sanctions against Russia.

Some may hope that China’s economic slowdown will curb its geopolitical ambitions. But its ongoing difficulties are just as likely to push China toward a confrontation with the US as they are to foster cooperation.

Nevertheless, despite what many in the US may think, economic decoupling is not a viable option. Although the Biden administration’s trade restrictions and bellicose rhetoric are a response to Chinese provocations, both countries must find a way to compromise bodog sportsbook review if they want to achieve stable, inclusive, and sustainable economic growth.

Kenneth Rogoff is a professor of economics and public policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics

To read the full commentary as it was published by Project Syndicate, click here.

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The anti-China trade policy aims to protect American jobs and businesses from China’s unfair trade practices in technology transfer, intellectual property, and innovation. The Biden administration is concerned about the unfair trade practices which put American companies in a challenging position to compete against China’s 70-90% control of global production of inputs, which are necessary for American technologies, infrastructure, energy, and health care. It risks America’s supply chains, workers, businesses and economic security. Biden’s ‘Investing in America’ has generated investments above $860 billion in electric vehicles (EVs), clean energy, and semiconductors. He also directed the increase in tariffs on imports of $18 billion, targeting Chinese products like EVs or lithium battery items, solar equipment and semiconductors. The tariff on EVs will jump from 25 to 100%.

The effectiveness of the sanctions on China is questionable. The overall disappointment of the Trump trade deal, signed on 15 January 2020, was the dispute resolution mechanism’s failure to ensure the agreement’s effective implementation. According to the Peterson Institute for International Economics, the deal also included China’s commitment to buy substantial additional US goods worth $200 billion, of which China bought only 59%. The US wanted its financial service providers to have enhanced access to compete on a more level playing field and expand their services export offerings in the Chinese market. The US administration failed to bring China to terms with provisions of the trade deal, including fair trade practices, transparency in administrative proceedings, and technology transfer and licensing on market terms. On the contrary, several experts argued that the trade deal would benefit China in the long-run at the cost of American interests.

The Biosecure Act, brought in January 2024, forbids US federal agencies from partnering with China’s Beijing Genomics Institute (BGI), Wuxi AppTec and several biotech companies that collect foreign persons’ genetic data. It calls out the Chinese military-civil fusion strategy to modernise the People’s Liberation Army (PLA). The fusion requires an organisation to cooperate with the CCP intelligence work mandatorily. The Act prohibits companies with certain biotechnology providers of concern in this regard. The Time to Choose Act was introduced in February, which prohibited the Department of Defense and other federal agencies from contracting with domestic companies like McKinsey & Company, which deals with the Chinese government. On April 24, on grounds of stealing consumer data and breach of privacy, a law was signed forcing ByteDance to sell off its TikTok operations in the US within nine months or face a ban. It will affect the 170 million users in the country. In response, China banned WhatsApp and Threads from the Apple store after Facebook and Instagram. However, these apps are not popular in China, so they will not significantly impact Meta.

China argues that these attempts are aimed at hurting its emerging sectors in technology, upsetting its economy, and countering its ideology. China labels the recent American measures to impose additional tariffs as a ‘domestic stunt’ to act tough just before the American elections. The US economy has many links with China. Efforts to decouple US-China economic relations can distort international trade practices.

The trade war also has an impact on global trade. A Centre for Economic Policy Research (CEPR) column estimated its effect with a rise in import tariffs in 2018-2019 worth about $450 billion-$350 billion by the US and $100 billion by China. However, third countries’ trade found increased opportunities rather than just causing shifts in trade patterns. Vietnam, Thailand, Korea, and Mexico benefited in global markets from products where US-Chinese trade declined from this conflict. Meanwhile, exports fell from Ukraine, Egypt, Israel, and Colombia. The foreign policy behaviour of major powers can be considered an indicator of the dynamism in the global power structure.

The trade war between the world’s two largest economies further adversely affects multilateralism and the international governance system. It defers several unresolved issues of the Global South, including a further reformation of the Bretton Woods system where the western countries have a deciding say. Further, it thwarts the global efforts to achieve UN SDGs by 2030, for instance, in the energy sector, which needs international cooperation.

Chinese foreign policy is driven by one constant factor that seeks its rise in the changing global power equation. To this effect, its foreign policy towards the US and India has shown consistency.

The Beijing administration will not likely change its course due to the US pressure tactics to get concessions from China in trade practices. According to Xinhua, US unilateral trade protectionist measures would not affect China and its development efforts. Elections and domestic politics in the US and India often use foreign policy as a base to garner public support for the respective regimes. Both countries are disproportionately affected by China’s advances in the global economic landscape. India has a $85 billion trade deficit in 2023-24 in favour of China, while the US has a $279 billion trade deficit in 2023.

The Government of India banned 59 Chinese apps in June 2020 citing concerns of threats to sovereignty and national security. The US has also shown its strength in foreign policy behaviour by banning Chinese companies from entering the country or calling out political leaders for not conforming to international laws. However, tit-for-tat responses further weaken faith in multilateralism and the practice of rules-based international order.

 Mehdi Hussain is a former assistant professor of political science at Kirori Mal College, University of Delhi.

To read the full article as it was published by Hindustan Times, click here.

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Until now, US restrictions on trade with China had been justified on national-security grounds, to prevent the Chinese military from acquiring sensitive technologies. While one could debate whether this policy made sense, it at least seemed to fit into a longer-term strategy. But these latest protectionist measures have nothing to do with China’s military capabilities. Instead, they aim solely to prevent cheaper, often better, green technologies from reaching US consumers.

The connection to the US election is obvious. Biden has been trying to head off Donald Trump by playing to the same protectionist sentiments that Trump, the presumptive Republican nominee, has been stoking for years. It was Trump, after all, who put the world on a new protectionist path when he imposed sweeping tariffs on steel, aluminium and many imports from China. Keen not to be outdone by Biden, he has already said that he would double the tariff on Chinese EVs from Mexico and apply additional ones to an even wider range of products.

Even taken in isolation, such measures are expensive and counterproductive. Tariffs impose higher costs on consumers and reduce competitive pressures, and thus innovation. In this case, they will also impede the transition to a net-zero-emissions economy. There are no economically redeeming features to the policy. Worse, the latest round of protectionist measures is part of an increasingly disturbing and dangerous trend. Step by step, major powers are unravelling an international economic order that delivered enormous gains over many decades through trade integration and globalisation.

These were hard-won gains. The first great wave of globalisation ended with World War I and was followed by trade wars and deep depressions throughout the interwar period. Although trade integration resumed after World War II, facilitating the reconstruction of Western Europe and Japan, its scope remained limited. It was not until the late 1980s and early 1990s that the next great wave of globalisation began, with global trade finally returning to its pre-1914 levels.

The rapid expansion of trade and investment flows over the next three decades would prove spectacularly successful across practically every macroeconomic metric. Roughly one-third of everything that has ever been produced was produced during this period, leading to the rise of a new global middle class. Poverty was dramatically reduced and the gap between rich and poor countries started to close for the first time since the start of the Industrial Revolution.

But over the past decade or so, debates about trade have changed. The new emphasis is on economic security, derisking and supporting domestic industries through massive industrial-policy subsidies. We seem to be going backwards, raising the risk of a return to the trade wars of earlier, darker times.

The International Monetary Fund and the World Trade Organization have both published extensive studies showing that deeper economic fragmentation would reduce global GDP by 5 to 7 percent, with a disproportionately large share of the burden falling on less developed countries. These are huge figures with huge consequences. The Sustainable Development Agenda that United Nations member states champion every year will become more of a grandiose dream than a practical objective. In the absence of a growing, still-integrating global economy, most of the 17 goals will become more difficult, if not impossible, to achieve.

One can easily imagine a better, more sensible scenario in which the United States returns to defending the rules-based global economic order, China rebuilds its credibility by adhering to the rules of the game, and the European Union lives up to its ambition to be a global champion of free trade. In doing so, each would advance its own interests, as well as benefiting the rest of the world.

Yet the trend is moving in the other direction. While Biden and Trump vie to establish their protectionist bona fides, Europe, too, has started to regard Chinese EVs as a threat, rather than as an opportunity to accelerate its green transition. Add to this China’s own talk about creating a self-sufficient ‘dual circulation’ economy, and India’s ongoing subsidies and resistance to trade, and you have the makings of a more radically fragmented global economy.

With these major powers rejecting the principles and policies that previously brought unprecedented economic gains, one must hope that policymakers everywhere will have the courage to step back and consider the bigger picture. History shows what we are risking by throwing globalisation into reverse. We must not go down that path again.

Carl Bildt is a former prime minister and foreign minister of Sweden.

To read the full article as it appears on the Australian Strategic Policy Institute blog, The Strategist, click here. 

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It is hard to exaggerate the significance of President Joe Biden’s May 14 announcement of tariff increases on a range of imports from China. The move opens a new front in the Biden administration’s China de-risking strategy. It also puts into sharp relief the challenging trade-offs involved in the growing policy arena of economic security.

In the May 14 announcement, President Biden directed U.S. Trade Representative Katherine Tai to impose a set of staged tariff increases on about $18 billion worth of imports from China in an array of “strategic sectors”: steel and aluminum, semiconductors, electric vehicles (EVs), batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products. The decision was based on the mandated four-year review of the tariffs imposed by former President Donald Trump in 2018 under Section 301 of the Trade Act of 1974.

The White House said the tariff increases were designed “to protect American workers and American companies from China’s unfair trade practices,” including forced technology transfers and theft of intellectual property. It also cited China’s “growing overcapacity and export surges that threaten to significantly harm American workers, businesses, and communities.” The products subject to the increased tariffs were “carefully targeted at strategic sectors—the same sectors where the United States is making historic investments under President Biden.”

The May 14 action marked a departure for the Biden administration. Its previous efforts to reduce risks and vulnerabilities in the U.S. economic relationship with China had been focused on the export side of the ledger, primarily denying Beijing access to sensitive U.S. technologies. The new measures target the import side, restricting China’s access to the U.S. market. Although Biden surprised many analysts after he entered office by leaving former President Trump’s earlier duties in place, tariffs had not been the favored arrow in the de-risking quiver of the current administration until now.

Few would argue with the diagnosis of the underlying problem that the Biden administration is trying to remedy. For at least bodog casino two decades, China has tolerated or encouraged intellectual property theft and forced technology transfers from the United States and other advanced economies. There is a clear line from those practices to China’s development of competitive technology products such as telecommunications hardware and electric vehicles. Beijing’s massive industrial subsidies have also been well documented and have contributed to overcapacity in a number of key sectors. With domestic demand in China weak, overcapacity there will inevitably be offloaded onto world markets, creating the risk of a “second China shock.” One worrisome harbinger has been the surge of Chinese car exports over the past few years, from around one million vehicles in 2020 to nearly five million in 2023.

Nor can anyone fault the Biden administration for concluding that mere jawboning is unlikely to change China’s behavior. For years, successive U.S. administrations have challenged Beijing, directly and indirectly, on its problematic industrial and technology-transfer policies. As recently as last month, Treasury Secretary Janet Yellen was in Beijing warning her counterparts about the risks posed by Chinese overcapacity.

Nevertheless, the Biden administration’s approach to this intractable problem is rife with trade-offs. The least of these is arguably the direct cost to American consumers. In theory, tariffs represent a tax on downstream consumers of the targeted products (as starkly shown by a new paper from the Peterson Institute for International Economics, which finds that presidential candidate Trump’s proposed 10 percent across-the-board tariffs and 60 percent tariff on imports from China would cost the average American household around $1,700 a year). The Biden tariffs cover only $18 billion worth—or around 4 percent—of imports from China, reflecting limited existing trade in many of the targeted products: few Chinese EVs are sold in the U.S. market today, and steel from China accounts for only about 2 percent of total U.S. steel imports. So the immediate price impact is likely to be small. But will tariffs have to rise further to give domestic manufacturers more space to compete, and will this have the desired effect or just reduce competition in the U.S. market while ratcheting up costs to consumers?

Another trade-off that has been widely noted in the wake of the May 14 tariff announcement is between the Biden administration’s goals of reducing economic dependencies on China and mitigating climate change. While massive subsidies and forced technology transfers may have enabled their success, the fact is that many Chinese EVs, batteries, and other clean-energy products today are highly competitive in price and quality; allowing them into the U.S. and other markets could help the Biden administration’s efforts to reduce emissions. The administration has struggled with this trade-off throughout its term, excluding Chinese solar modules and cells from earlier tariffs to ensure a sufficient supply while domestic producers built up their capacity.

Alongside the economic trade-offs of the May 14 tariffs are significant diplomatic ones. The Biden administration has gone to great lengths to strengthen ties with traditional allies in Europe and Asia, and to win over new partners around the world. Since Chinese overcapacity has to go somewhere, a tariff wall around the United States is likely to produce trade diversion to Europe, Japan, Korea, and other markets, increasing the pressure on those countries to take similar measures to limit Chinese imports. These partners are also worried about retaliatory steps by China that could have global effects, such as further restrictions on exports of critical minerals like graphite and gallium that are mostly processed in China.

Allies are also worried about the implications for the international economic order of a U.S. drift toward protectionism. Unilateral Section 301 tariffs such as those announced on May 14 are generally viewed as inconsistent with U.S. obligations in the World Trade Organization (WTO). While this concern carries little weight in Washington, where the WTO is generally viewed as ineffective and not fit for purpose, the institution and the trade rules it notionally safeguards are seen in most other capitals as a critical underpinning of a rules-based order. The practical concern is that U.S. actions inconsistent with existing rules give other countries license to violate them as well.

As an aside, an official from a foreign embassy in Washington contacted for this article noted that, for all the suspicion with which Section 301 is viewed in her capital, it would have been more troubling if the Biden administration had used Section 232 of the Trade Expansion Act of 1962—which authorizes trade restrictions to address threats to national security—to justify the new tariffs, which were ostensibly designed to address disruptions to U.S. commerce, not national security. Ironically, Section 232 action would have been more likely to pass muster in the WTO, which historically has taken an expansive view of member states’ rights in national security.

Could some of these trade-offs have been avoided if the Biden administration had taken another tack? Given that China has long been pursuing a non-market, export-powered model of growth that is widely viewed as disruptive to the global economy, the administration might have worked through institutions like the G7, the Organization for Economic Cooperation and Development, and the International Monetary Fund to build an international coalition demanding that Beijing change direction and, once that proved ineffective, authorizing collective action to rein in China’s exports. This approach would have taken more time and had less immediate political benefit domestically but might have posed fewer trade-offs for broader U.S. interests.

There is little doubt that global risks—including ones stemming from China’s mercantilist policies—have increased in recent years, and that government intervention in markets to mitigate those risks is in many cases warranted. But as the U.S. government pursues economic security policies such as those announced on May 14, it needs to thoroughly weigh the costs and benefits and consider alternative approaches that could make the trade-offs less pronounced.

To read the full article as it appears on the Council on Foreign Relations’ website, click here. 

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Bipartisan Embrace of Denying Realities Escalates Future Economic Risks

Mark Kennedy

Director, Wahba Institute for Strategic Competition

As the US drifts further from the economic orthodoxy that propelled America to global economic leadership, I am struck by how those across the political spectrum deny reality in justifying their protectionist actions. 

Reality Denied: “Tariffs won’t increase inflation.”

We are led to believe that whether tariffs cause inflation is different, depending on which president implements them.

Referring to new tariffs proposed by Donald Trump, President Joe Biden’s spokesman Andrew Bates said in August that, “Combining a sweeping tariff tax on the middle class with more trickle-down tax welfare for rich special interests would stifle economic growth and fuel inflation.” Bates said that President Biden “strongly opposes” the Trump plan, suggesting it would lead to higher prices and higher inflation. Indeed, analysis shows that part of the resurgence in inflation we have experienced recently is from tariffs on Chinese imports.

Now, as Biden rolled out his added tariffs on China this week, US Trade Representative Katherine Tai asserted, “I think that that link in terms of tariffs to prices has been largely debunked.” Tai argued that “the tariff hikes, combined with public investments, would help spur domestic manufacturing, which could help prevent future inflation and price volatility.”

Clearly supply chain shocks relating to the COVD-19 pandemic had a major impact on inflation and investments recently sparked may or may not over time have a perceptible impact on this variable. But whether fueled by “tax welfare” or “public investment,” the International Monetary Fund thinks US core inflation (excluding food and energy) “is a half percentage point higher than otherwise would be because of fiscal policy” as the US continues massive deficit spending during today’s period of low unemployment. Contrary to Tai’s assertions, this deficit funding spending magnifies rather than mitigates inflation.

Those seeking to provide a 101 explanation of economics put it this way:

Tariffs increase the price of goods and services in domestic markets by applying a tax on imported goods that is paid by the domestic importer. To cover the increased costs, the domestic importer then charges higher prices for the goods and services.

Does anyone really think that the tariffs on Chinese solar panels will not lead to increased prices on solar panels available in the US (and slow down progress toward the energy transition)?

Reality Denied: “Other nations won’t retaliate.”

In his defense of his idea for broad tariffs on friends and foe alike in pursuit of achieving a balance of trade, US Trade Representative in the Donald Trump administration Robert Lighthizer doubts others will retaliate. Yet both historical and recent facts suggest otherwise.

President Biden recently called for tripling tariffs on Chinese steel and aluminum imports (that represent only 0.6% of the US market). The next day, China imposed a 43.5% tariff on propionic acid  it says the US is dumping on the market. 

Coincident with a new law requiring TikTok to be banned if it is not sold in nine months, China ordered Apple to remove several social media sites from it app store, including Meta-owned apps WhatsApp and Threads.

Given all the advance warnings that China received about the US responding to its perceived “overcapacity” during visits by Treasury Secretary Janet Yellen and Secretary of State Antony Blinken, Yellen recently said she hoped the US will not see a significant Chinese retaliatory response. Yet she was honest enough to admit, “but that’s always a possibility.”

Does anyone not believe that Chinese imports of US agricultural products being at a three-year low are driven in significant part by retaliation against tariffs?

The list of denied realities is much longer, including that solar panel imports represent a strategic threat to the US. Suffice it to say that two parties out-competing each other in their embrace of economic myths, rather than holding each other to account based on proven realities, escalates future economic risks.

Tariffs Have Consequences

Jerry Haar

Global Fellow, Wahba Institute for Strategic Competition

In the fast and furious competition between presidential candidates to determine who is more protectionist than the other vis-à-vis China, President Biden has upped the ante with his recent announcement of new tariffs of $18 billion on Chinese EVs, semiconductors, batteries, solar cells, steel, and aluminum. (The current tariff of 25% on EVs will increase fourfold, to 100%.)

While EVs are in the center ring of this three-ring protectionist circus, the pathology of our trade predicament extends beyond any one industry and has its genesis in politics, pure and simple, combined with media that thrives on stirring things up and a public whose basic knowledge of economics would fill half a thimble. 

Xenophobes and isolationists who would sever economic relations with China buy into the specious argument that “we don’t make anything anymore” and we need to adopt a strictly made-in-America agenda and “bring those jobs back home.” While it is true that traditionally US-made products such as TVs, Levi’s jeans, cellphones, flatware, and steel rebar are sourced overseas, the US exports more than $165 billion in goods to China, including machinery, electrical equipment, vehicles, aircraft, and pharmaceuticals—all high-value goods that employ thousands of Americans, directly and indirectly. Additionally, when the media reports US-China trade balances, it invariably excludes our greatest strength in global commerce—services, where the US registers a surplus with China of nearly $15 billion. Travel, financial services, and intellectual property are among our leading exports to China. The last is clearly the most important since intellectual property is a knowledge-based asset that a great many Chinese manufacturers incorporate into their finished products under licensing agreements with US firms. Ironically, that would make many Chinese imports also (in part) a U.S. export.

Back to EVs, the Biden administration champions a “green” agenda where alternative energy is a high priority. Therefore, increasing tariffs impedes the goal of a carbon-free planet. Figuratively speaking, it is the equivalent of a circular firing squad, where the result will be an increase in EV prices for consumers not only in the short term, but in the long term. The price of fossil fuels will not be rising any time soon, thereby creating a disincentive for consumers to purchase electric vehicles.

One can expect China to retaliate in some form in response to the Biden administration’s latest tariff salvo, while the administration itself would be wise to keep in mind that the US is 100% reliant on imports for more than a dozen key minerals deemed critical by the US government. China is the primary import source for those minerals.

Like it or not, the US and China need one another to address serious global problems such as drug trafficking, terrorism, fentanyl, transnational crime, and environmental degradation. It would be an enormous mistake for America to jeopardize its national and economic security due to political expediency. Tariffs, indeed, have consequences.

The Folly of Biden’s New China Tariffs

Marc Busch

Global Fellow, Wahba Institute for Strategic Competition

On May 14, US Trade Representative Katherine Tai announced the result of her office’s four-year review of the Section 301 tariffs on China. 

The review finds that the duties “have been effective” in getting China “to take some steps” to stop its “unfair technology-related policies and practices,” but concludes that “further action is required.”

The press release explains that further action will bodog online casino entail adding new tariffs and increasing existing ones. Tai’s list of proposed tariff hikes includes electric vehicles (100%), lithium-ion batteries (25%), medical gloves (25%) and semiconductors (50%), among others. 

The 1974 Trade Act allows for Section 301 tariffs to be recalibrated to ensure compliance from a recalcitrant trade partner. But this list looks to be more about supporting President Biden’s green initiatives. The 301 report explains that “[f]or many of the sectors covered by these proposed tariff increases, the United States has made significant investments, including through such initiatives as the IRA and the Bipartisan Infrastructure Law.”

Tai’s tariff salvo is about US competitiveness in clean technology, not Chinese forced-tech transfer policies. The Biden administration has done nothing to protect the intellectual property of America’s innovators, as evidenced by its retreat on digital trade and its feckless Special 301 Report issued in April. But if cheap talk about intellectual property clears the way for Tai to slap new tariffs on China and support Biden’s floundering executive order on electric vehicles, she’s all in.

 Moreover, the press release flags the negative effects of the Section 301 tariffs “associated with retaliatory tariffs that the PRC has applied to US exports.” This is important, because the 1974 Trade Act does not give the president authority to wage an all-out trade war. But that’s what Presidents Trump and Biden have done through four rounds of Section 301 tariffs, and now into another round.

HMTX and other American companies will argue this before the US Court of Appeals for the Federal Circuit, looking for a tariff rebate. They insist the third and fourth lists of 301 tariffs were not mere adjustments of the first and second, but an “unprecedented, unbounded, and unlimited trade war impacting over $500 billion in imports from the People’s Republic of China.” The US Court of International Trade refused to “unscramble this egg,” but Tai’s proposed China tariffs may help the Court of Appeals get the job done right this time.

In this election season, new China tariffs will make a good soundbite on the campaign trail. But new import duties will punish American companies that use imported inputs or retail consumer goods. It’s time for Congress to rein in these abuses of Section 301 and reclaim its authority on tariffs.

New US Tariffs on China, “China Plus One,” and Southeast Asia

Lucas Myers

Senior Associate, Southeast Asia and Indo-Pacific Program

The US announced a suite of new tariffs on Chinese imports targeting the electric vehicle and green and advanced technology sectors. Following its covid-era economic slowdown, the People’s Republic of China has pursued an export-driven model to jolt its recovery, but concerns about overcapacity soon emerged around the world. The US tariffs are a response to protect its still-burgeoning industries in these key sectors, as well as in line with policies intended to boost domestic manufacturing in America.

However, amidst bilateral US-China rivalry and American efforts to protect strategic industries, perhaps the biggest potential winners are the countries in the Association of Southeast Asian Nations (ASEAN).

The US-China trade war and the risks of investing in China spurred many international firms to pursue a “China Plus One” strategy in recent years, aiming to diversify manufacturing and mitigate supply chain dependence upon China. Southeast Asia, by virtue of its relatively young population, free trade agreements with key players, prime geographic location, and competitive labor costs, is a magnet for foreign direct investment in manufacturing. Indeed, data suggests that the ASEAN states, particularly Vietnam, emerged as winners in the initial stages of the US-China trade war. By 2022, ASEAN exports to the US had soared 17.6 percent over the previous year to $336.4 billion, and every Southeast Asian state bar Brunei and Singapore expanded their share of US imports. In 2023, China had ceased to be the top exporter to the United States.

Yet, the picture is somewhat more complicated than a simple story of multinational firms moving to Southeast Asia to avoid China. Moreover, US efforts to secure and diversify its supply chains are far from simple in ASEAN. 

For one, it is not only American companies making the shift to Southeast Asia but Chinese manufacturers too. Crucially, Chinese firms are attempting to bypass tariffs by selling components to manufacturers in ASEAN, whose finished goods eventually enter the US market marked as originating in places like Vietnam. Indeed, there are now calls for the imposition of tariffs on solar cell imports from four Southeast Asian countries due to allegations of Chinese manufacturers bypassing existing tariffs. In the electric vehicle sector, Chinese companies are aggressively pushing into Southeast Asia both as a booming market and a manufacturing hub, particularly Thailand. 

Second, US economic engagement in the region still lags China’s. While the US government works to facilitate economic ties, such as considering upgrading Vietnam to “market economy status,” and pursues closer investments and relations across the board—often in conjunction with other allies and partners like Japan—the market access that ASEAN craves is not on the table. Meanwhile, ASEAN’s trade with China continues to grow, complicating regional calculus in US-China competition. US efforts to provide an effective alternative to China, such as in Indonesia’s crucial nickel industry, have fallen flat. Although the US remains the largest source of foreign direct investment in Southeast Asia, China is attempting to tie the region to it economically. 

As the US grapples with China over trade and the industries of the future, more global manufacturing can be expected to move to Southeast Asia. But today China still has an edge in ASEAN’s economies. The US must do more to ensure that “China Plus One” in ASEAN leads to secure, diverse supply chains and that the region has a viable alternative to Chinese investment.  

Biden Administration China Sanctions Reveal True Policy Objectives

Keith Rockwell

Global Fellow, Wahba Institute for Strategic Competition

The decision by the Biden administration to levy punishing tariffs on an array of Chinese imports will have little economic impact. But should these trade frictions spread, and there is a chance they will, the diplomatic consequences may be much more severe. 

All told, $18 billion of Chinese imports will be hit with higher tariffs.  Duties on electric vehicles will quadruple to 100%, duties on steel will jump threefold to 25%, while tariffs on lithium-ion EV batteries will rise by the same margin also to 25%. 

China dominates the global electric car market and exports this year are expected to grow 25% to 5.3 million units. But in the US market the Chinese have no presence. 

For years, a cavalcade of US anti-dumping and countervailing duties have suppressed Chinese sales of steel and today China makes up less than 1% of total US steel imports. 

But this is an election year and with industrial states like Michigan, Wisconsin and Pennsylvania key to the presidential prospects of both President Biden and Donald Trump, this week’s announcement comes as no surprise. Neither candidate wants to be seen as weak on trade with China and when Mr. Trump said he would raise tariffs on electric cars to 100%, Mr. Biden beat him to the punch. 

Beyond the muscle flexing, this announcement reveals the inherent inconsistencies in the administration’s flagship Inflation Reduction Act. The act has been billed as a game changer in addressing climate change, but the reality is that the law features a plethora of conflicting objectives. The Chinese are the world’s leading producers of electric cars and solar panels, and they make and sell them far cheaper than anyone else. If the IRA was really all about the environment it would make sense to ensure that affordable electric vehicles and solar energy were available to everyone. 

The new tariffs  expose the real motivation behind the IRA and the Chips and Science Act – the creation and preservation of US jobs, ideally the administration believes, union jobs. The IRA’s tax incentive scheme is heavily skewed against foreign producers of electric cars and batteries and domestic companies have, for now at least, been unable to price these cars attractively.  This, together with an underdeveloped charging network, helps explain why EV demand is flagging. 

China is well aware of the growing alarm in the US and European Union at the threat of surging Chinese exports. Chinese carmaker BYD, the world’s largest producer of electric vehicles is building a production facility in Hungary, an EU member state. BYD and other Chinese producers are actively considering setting up shop in Mexico which would enable them to sell cars in the US duty-free. Moreover, by producing in North America they could also be eligible to tap into the rich vein of subsidies on offer under the IRA. 

The Biden administration has taken note. Washington has flagged its concerns to Mexican officials and is now reaching for the “national security” trade lever by conducting, since February, an investigation into whether “connected” Chinese cars might provide a means to access data of American consumers and should thus be banned.

But it’s a tricky balancing act.  Mexico is the largest US trading partner selling more goods to the country than any other and importing more US goods than any country but Canada. 

Like all countries Mexico wants to be seen as welcoming foreign investment and the Chinese already have manufacturing operations in the country. If elected, Mr. Trump intends to violate the terms of the agreement he negotiated with Mexico by slapping 100% duties on cars built in Mexico by Chinese companies. Would President Biden entertain such a move as well?

Mexicans go to the polls June 2 and Mexico City Mayor Claudia Sheinbaum is widely expected to win. President Biden understands sanctions would be a slap in the face of the new president of his country’s largest trading partner. 

On solar panels the problem is similar. Chinese imports into the US have not been huge but Chinese owned companies in Southeast Asia have seen their exports to the US market jump in the last year. To hit these products with duties risks alienating the Malaysians, Thais and Vietnamese. The Biden administration’s supply chain resilience plan hinges on “friendshoring” and Mexico, Thailand and Vietnam are often cited as key friends.  Hammering imports from these countries would not be considered friendly. 

There is little doubt China’s massive government support tilts the playing field in trade in electric cars, steel and solar panels. We will learn soon the extent of this support when the European Union releases its study on Beijing’s EV subsidies. 

But trade sanctions are a blunt instrument which often inflicts damage on unintended targets including allies and domestic consumers. The cost of these actions will likely rise soon if the Chinese retaliate against, say, General Motors which sold 2.1 million cars in China last year. 

The US-China commercial relationship is probably beyond repair, at least in the short term. As trade tensions escalate the bigger danger is the threat of collateral damage to US allies, to the development of resilient supply chains and to the administration’s environmental aspirations.  

Protectionism Is Hurting US Allies

Rory Linehan

Global Fellow, Wahba Institute for Strategic Competition

As I’ve argued previously, the US’ greatest strength is its network of allies, underpinned by shared values such as democracy, human rights, and market-driven economies. 

The US was only able to build the global economic order, multilateral institutions and create new markets for its good and services with the support of our allies, guided by shared values. This helped usher in an unprecedented era of global peace and prosperity which now stands in jeopardy.  

The latest round of US tariffs on China reflects a broader push to protectionist policies by successive administrations. From the blanket steel and aluminum tariffs of the Trump Administration to the subsidies of the Inflation Reduction Act to the Biden Administration’s new China tariffs, the US Government has upended its approach to a market-driven economy. While the US isn’t alone among its allies in pursuing protectionism, it stands out as a leader in the breadth, depth, and scope of its actions. 

This is deeply concerning. The two major world wars were both preceded by sharp rises in protectionism. Economic integration is a key to securing peace. Countries that trade together, rarely go to war together – the economic pain is just too high. Protectionism is a tool that must be used sparingly because its unintended consequences are significant.

United States Trade Representative, Katherine Tai, has said the primary goal of the latest round of tariffs is to motivate China to change its unfair trade practices. Issues such as forced IP transfer and IP theft should and must be addressed. National security and securing supply chains are worthy goals. However, the US Government itself has legislated many of the same subsidies and tariffs to support its own manufacturing industry that it complains China is doing. 

Moreover, US protectionist policies are not just hurting China, they are hurting our allies. The steel and aluminum tariffs not only hit China but the European Union and Japan. The subsidies of the Inflation Reduction Act made it harder for US allies to do business in the US. In response, Japan, the EU, Canada, Australia, and others have since implemented their own domestic subsidies which will make it harder for US businesses to compete abroad and further erode shared economic ties.

In this week’s round of tariffs, the Biden Administration acknowledged the need to work with likeminded partners to curtail China’s unfair trading practices and the benefits of a rules-based trading system. This was terrific to see. However, many of the US’ partners could rightly complain about its own market distorting practices. If the goal of this week’s tariffs was to encourage China to change its unfair trading practices by working together with allies, the US will find this hard going. While it will likely find some success on China’s dumping of EVs and solar panels, it will not find much sympathy for its broader complains of unfair trading practices. In the longer term, if it’s an economic choice between the US and China, that decision is made. China is the top trading partner to more than 120 countries. US allies, the EU, Japan, ASEAN, the UK, and New Zealand have Free Trade Agreements with China but not the US. In an environment where China’s economic ties continue to increase with US allies, it’ll be a hard sell for any US Administration to convince allies to side with it over China. 

If the Administration is to achieve its stated bodog casino goal of changing Chinese unfair trading practices by working with partners, it’ll need to also consider its own trade-distorting policies and reignite a policy of market-driven economic integration with its allies. If not, the US may isolate itself from its allies at a time when the world desperately needs to come together to address our shared challenges.

US Tariff Diplomacy: “It’s China Stupid; Never Mind the Environment.” 

Klaus Larres

Fellow, Global Europe Program and Kissinger Institute on China and the United States

US-Chinese relations have been on a downward slope for almost a decade. The formal announcement that the Biden administration intends to significantly increase tariffs on electric vehicles (EV), solar panels, advanced batteries, and other climate-related technologies from China has raised tensions further. Yet this was an unintended though not unforeseen consequence; it was not the driving force behind President Biden’s decision. In fact, the US is deeply concerned about keeping relations with Beijing on an even keel to prevent them from veering out of control, as threatened to be the case before the bilateral Biden-Xi Jinping summit in San Francisco in November 2023.

Above all, Biden’s tariff diplomacy is dictated by the US general election in November 2024. It also relates to the Biden administration’s concerns regarding US national security and its vision of how the green energy transition in the US should proceed. Biden has imposed new tariffs on Chinese products for three major reasons:

1. In view of Donald Trump’s loose talk about his firm and protectionist foreign policy course if he were to be elected in November, Biden clearly feels that he too has to demonstrate that he is equally tough, if not tougher on China, than his Republican competitor. In practice, imposing 100 per cent tariffs on Chinese EVs, for instance, means little in view of the fact that just over 2,200 Geely-made EV vehicles entered the US market in 2023. Yet Biden clearly believes that among undecided voters, his rhetoric about defending the American car industry against a forthcoming industrial onslaught from China may help his electoral prospects.
   
   Recent polls have shown Biden is behind Trump in five of the six most important swing states. As Biden needs to win Pennsylvania, Wisconsin, and Ohio (all states with large manufacturing bases) to get a second term in office, the imposition of extremely high tariffs on EVs, solar panels, advanced battery cells, and other high tech and climate-related technological products might be decisive for winning these states.
   
   
2. The Biden administration also appears to be genuinely concerned that having China dominate the supply lines for manufacturing EVs (and other climate-related products such as solar panels) would have a seriously negative impact on US national security. That way, Beijing might well be able to raise prices unexpectedly, put pressure on the US government by limiting production resources, threaten to disrupt US domestic energy, and, not least, also obtain data collected by EVs about the driving habits of individual Americans and information about US road traffic, perhaps including military and security-related traffic movements. Thus, at least indirectly, US national security would become dependent on the good will and cooperation of a potentially hostile foreign power. This, it seems, is the thinking which dominates the White House. It is difficult to judge whether or not this is a truly realistic assessment.
   
   
3. The Biden administration is also firmly convinced that a slower but more solid and reliable transition to solar power and EVs will make the green transition more palatable for the US consumer, who can get used to it gradually, leading to a more robust green energy transition, according to the administration. A ‘big bang’ approach that could follow the fairly sudden importation of hundreds of thousands of cheap and highly subsidized Chinese EVs would be much more fragile and uncertain and thus, counterproductive to realizing the energy transition in the long run. 
   
   This, however, means that nothing much will happen in terms of the introduction of climate-friendly policies before the presidential election. Thus, Biden makes sure not to upset any potential voters with any new dramatic policy turns while reassuring environmentally concerned voters that a better policy has already been set in motion. Understandably, like any US President, Biden wishes to have his cake and eat it too. Yet, such a course of action clearly causes concern among many environmental organizations that are worried that for electoral and national security reasons, the transition to solar power and electric cars will be delayed for a significant period of time. One analyst argues that the climate situation has become so precarious for the survival of mankind that the world, including the US, can simply not afford to delay the green energy and climate transition a moment longer. He points out that if the Chinese wished to subsidize America’s transition to green energy and EVs by offering cheap electric cars to the US consumer, Washington should not reject this offer.

It is clear that all foreign, domestic, and indeed energy and climate policies in the US have become secondary to electoral concerns. This applies to all major candidates, including Biden. The good news among this sad fact of life is that within less than six months, policy makers can look beyond focusing their attention on the forthcoming election and perhaps deal with the energy transition in a more serious way.

To read the full article as it appears on the Wilson Center’s website, click here.

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Both sides have called this meeting productive and reports in the press suggest that, in the careful world of international diplomacy, it suggests Xi will attend a summit of Pacific Rim nations in San Francisco next month where he will meet face to face with U.S. President Joe Biden.

It’s all part and parcel of the diplomatic focus the U.S. government has trained on China since Balloon-Gate blew everything up earlier this year. U.S. Secretary of State Antony Blinken visited to help get everybody talking again. U.S. Treasury Secretary Janet Yellen established a pair of “economic working groups” with her counterparts. U.S. Commerce Secretary Gina Raimondo went to Shanghai Disneyland. Even John Kerry, the Biden administration’s envoy on climate change, was in Beijing this summer to talk with Chinese officials about how we’re all cooking the planet by continuing to burn fossil fuels.

But what made the Schumer delegation stand out was its bipartisanship. Sens. Mike Crapo (R-ID), John Kennedy (R-LA) and Bill Cassidy (R-LA) were part of the group, as were Sens. Maggie Hassan (D-NH) and John Ossoff (D-GA), and it provides further evidence that the American side wants Sino-U.S. relations to be less heated and more predictable. And this is not a terrible idea when you’re talking about interactions between nuclear-armed states with huge militaries and economies.

We should, however, keep the Trump-era Section 301 tariffs on China in place.

Yes, that’s right. Donald Trump was many things, including hard to predict – here he is this past weekend, talking about “The Silence of the Lambs”, as one typically does during a campaign speech – but U.S. trade policy regarding China went through a necessary rearrangement during his administration, and the Section 301 tariffs enacted during his time in the White House are its chief result.  

The United States for years ran hundreds of billions of dollars in annual goods trade deficits with China. With the tariffs in place to provide some relief from Chinese import competition, and now with something like a bona fide industrial policy to complement them, the supply chains on which the U.S. relies have begun to diversify. There are factories – long term investments that will pay economic dividends for years to come – being built across the country. They represent the industries of the future, and it looks like they’re gonna be good union jobs. The tariffs laid the groundwork for that.

The Chinese government obviously doesn’t like these tariffs and wants them removed. The complaints against Chinese trade policy that raised them in the first place haven’t been addressed. China still heavily subsidizes key industries to the point of overcapacity, and looks likely to try to export its way out of its current economic doldrums.

And hey: Good luck with that! But the United States shouldn’t be the destination for those inevitably dumped imports. Make nice with the Chinese, engage with its leadership, sure. But the tariffs should stay up, and the U.S. should continue to improve its industrial resilience.

To read the full blog post, click here

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