Prof. ST Hsieh
Director, US-China Energy Industry Forum
March 16, 2023
The following report verifies that US tariffs initially imposed by the Trump administration, and maintained by the Biden administration, contribute to US inflation. Further, the volume of trade does not seem to be affected by the tariff. Neither do the tariffs stimulate domestic production significantly. Overall, the US tariff war so far has not achieved the economic goal of balancing trade.
But the trade war sharpens and deepens the confrontations between the US and China. It has created difficulties for the world. Some in the Biden administration insists on continuing the tariff war because the tariffs “provide leverage to persuade China to change what the US considers unfair practices.” China most likely feels the same way because the US may blink first. It is a test of political will of the leaders, but the general public care more about inflations.
US Tariffs on Metals, Some China Goods Raised American Prices
Wed, March 15, 2023 at 12:22 PM PDT
(Bloomberg) — US importers bore almost the entire burden of tariffs that President Donald Trump placed on more than $300 billion in Chinese goods, raising the cost of goods bought by American companies, a report by an independent US government agency found.
The US International Trade Commission, a bipartisan entity that analyzes trade issues, found an almost one-to-one increase in the price of US imports following the so-called section 301 tariffs, it said in a report on Wednesday. The report came in response to a directive from Congress as part of a law passed last year.
The conclusions back the longtime assertion of US Chamber of Commerce and independent academic economists that the cost of the tariffs hurt American firms rather than those in China, and contradict Trump’s claim that his trade partner paid the ultimate cost of the duties.
President Joe Biden’s administration has kept the tariffs on imports of Chinese goods in place for more than two years and is currently undertaking a review of the duties to evaluate their effectiveness and decide if they should continue.
Prices for imports from China across some of the most affected industries — including imports of computer equipment, semiconductors, furniture and audio and video equipment — increased as much as 25% in 2021, according to the agency. Prices of US-produced goods in some industries rose 3% to 4%.
Imports of the affected products from China declined to about $265 billion in 2021 from $311 billion in 2017, the year before the duties were imposed, the ITC said.
Across all affected sectors, the duties lowered Chinese imports by 13% during 2018 to 2021, raised US output by 0.4% and increased prices of US products by 0.2%. At a three-day public ITC hearing last July, producers that compete with imports from China spoke in support of the tariffs, with those such as manufacturers who rely on the affected imports as inputs opposing them.
The ITC also looked at duties on inbound steel and aluminum shipments under section 232 of the Trade Expansion Act of 1962 in the same year, tariffs instituted to protect national security. It found that they reduced imports of affected steel products by 24%, raised US prices by 2.4% and increased American production by 1.9%. Aluminum imports fell 31%, while prices in the US rose 1.6% and local output climbed 3.6%. Production in downstream industries using steel and aluminum, such as construction and manufacturing, decreased, while prices rose.
The US Trade Representative’s last year began a review of the tariffs, which would have started to automatically expire in the middle of last year absent an evaluation of their impact. USTR got hundreds of requests for the tariffs to continue and has kept them in places as it undertakes the review. The administration received thousands of public responses to a request for comment before the window to do so closed in mid-January.
Some Biden administration officials last year argued that reducing tariffs on household items could help ease US inflation, but USTR Katherine Tai has underlined how the tariffs provide leverage to persuade China to change what the US considers unfair practices.
In December, the World Trade Organization said the US violated international trade rules when it imposed the steel and aluminum tariffs under Trump starting in March 2018, a decision Washington rejected and stated won’t lead to a removal of the duties.
The US and European Union are said to be considering new tariffs on Chinese steel and aluminum as part of a broader bid to fight carbon emissions. That’s a change from the Trump administration’s reliance on the WTO’s national-security loophole in favor of another WTO exception for trade restrictions imposed in the name of protecting the environment.
(Updates with information from report starting in second paragraph.)