Are tariffs the answer?

MYRNA BROWN, HOST: Coming up next on The World and Everything in It: trade with China.

On Sunday, Chinese officials said they’ll investigate whether U.S. companies are selling some plastic products at below-market value.

That’s in response to the Biden administration announcing last week that it’s raising tariffs on some Chinese imports.

MARY REICHARD, HOST: President Biden says he wants to protect national security concerns and American workers, but are tariffs an effective tool for dealing with China?

WORLD Radio’s Mary Muncy has the story.

MARY MUNCY: Back in 2020, reporters asked then-presidential candidate Joe Biden about the tariffs President Donald Trump levied on Chinese goods.

NPR, JOURNALIST: Would you keep the tariffs?

BIDEN: No. Hey look, who said Trump’s idea is a good one?

Biden told NPR that while he believes China should be held accountable for things like espionage and human rights violations, tariffs are not the way to do it. Instead, he later told The New York Times that he would investigate China’s abusive trade practices before implementing new policies.

Then, four years later…

C-SPAN, JOE BIDEN: Today I’m announcing new tariffs on key sectors of the economy that are going to ensure that our workers are not held back by unfair trade practices.

That includes bumping up tariffs on Chinese electric vehicles from 25 percent to 100 percent. Chinese EV manufacturer BYD just released a vehicle that would have cost about $12,000 without tariffs, but the import tax makes it unlikely the car will reach American markets.

Another tariff adds a 25 percent tax for importing Chinese steel and aluminum products. Biden also put tariffs on batteries, the minerals to make those batteries, and things like semiconductors, all technology he says is vital to American industry and national security. Here he is at the White House last week.

BIDEN: You heard me say it before. Wall Street’s important, a lot of good folks there, but they didn’t build America. The middle class built America, and unions built the middle class.

Biden says the new tariffs will help workers, but some analysts see consequences coming for consumers.

RYAN YOUNG: Consumers aren't going to get any benefit from that. In fact, it lets domestic producers keep their prices even higher.

Ryan Young is a senior economist with the Competitive Enterprise Institute. He says that instead of pushing prices down, raising the bar for outsiders incentivizes companies at home to follow suit.

YOUNG: When you raise a tariff, the domestic producer can raise their prices up to the amount of that tariff and still not be undercut on price.

So what’s behind American tariffs on Chinese goods?

It goes back to when China first joined the World Trade Organization in 2001. The country massively increased its exports, and some say the flood of goods swept away millions of jobs in other countries, including the U.S.

Twelve years later, economists gave those consequences a name, “China shock.”

But Young says those first bad years of China Shock are not the end of the story.

YOUNG: Despite the China Shock, not only are net jobs way up since 2001, when China joined the World Trade Organization, but manufacturing output is at near record levels.

Despite the turnaround, in 2018 Donald Trump put tariffs on a range of Chinese consumer goods to try to ease that. Trump said he wanted to fix a trade deficit with countries around the world, but especially China.

PBS NEWSHOUR, DONALD TRUMP: The word is reciprocal. That’s the word I want everyone to remember. We want reciprocal, mirror. If they charge us, we charge them the same thing.

Young says China is using unfair trade practices and benefitting from forced labor, but tariffs aren’t the way to fix it.

YOUNG: If we want to address, say human rights concerns, instead of a blanket tariff against the entire Chinese economy, let’s take a more surgical approach. Don’t just tariff entire industries and entire product lines, it’s not going to do what you want it to do.

But others say China’s behavior is bad enough to warrant these tariffs even if they harm consumers in the short term.

Elaine Dezenski is the Director of the Center on Economic and Financial Power at the Foundation for Defense of Democracies.

ELAINE DEZENSKI: It's less that they would steal, you know, existing manufacturing jobs, and it's maybe more about preventing industries from gaining a foothold in the clean energy sector.

Dezenski says that concern will grow if the U.S. wants to move away from fossil fuels.

DEZENSKI: It's about building resilience into our system, not necessarily cutting off, you know, the players.

So, are tariffs the right way to accomplish energy independence?

Critics like Young say tariffs usually don’t accomplish the goals they set out to and just raise prices for consumers.

But Foundation for Defense of Democracies economist Josh Birenbaum says these tariffs might be different, because the Biden administration’s main focus is on two industries supporting critical infrastructure: clean energy and healthcare.

JOSH BIRENBAUM: The situations where tariffs are most appropriate is when you are trying to protect industry that's still in its infancy.

Birenbaum says over the past year, China has used other nations’ dependence on it for critical minerals like graphite, gallium, and germanium to get concessions. And he says the U.S. doesn’t want to get caught in that position.

BIRENBAUM: There is no question that tariffs make goods more expensive for consumers in the short term. In the long term, however, you allow for greater numbers of competitors, which should drive costs down. The last thing we need is for China to have a monopoly over the space that allows them to raise costs later in a way that we can't address.

Reporting for WORLD I’m Mary Muncy.

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