There is No Tariff Strategy for China

10 September 2021, 2051 EDT

The White House is close to announcing “301s” (investigations under Section 301 of U.S. trade law) into Chinese use of industrial subsidies. It matters because 301s are the prelude to tariff imposition.

If you import stuff from China that gets classified as requiring Section 301 import duties, you’ll have to pay that extra margin, which means U.S. importers must either directly eat the cost of tariffs or pass those costs on to consumers (or they can appeal to the Court of International Trade for a refund of Section 301 duties, which then burdens the taxpayer and incurs administrative cost).

Trump of course used tariffs extensively as the main tool of his “trade war” with China and it achieved nothing other than the imposition of reciprocal tariffs from China. President Biden shares some of this economic nationalist sensibility, calling tariffs “the greatest negotiating tool in the history of our country.”

They’re either indecisive, or are deliberately avoiding being pinned down into clear, analytically defensible choices.

Maybe that’s true. But no tool does everything, and a tool’s value has to be judged against its purpose in context. So what’s the purpose behind wielding tariffs against China?

This is the problem. I have friends serving in the Biden Administration, and a lot of respect for people like Jake Sullivan and Kurt Campbell. But there’s a bit of a “Best and Brightest” problem in U.S. policy toward China and Asia at the moment. So much brain power in the administration, so much experience, and yet no realistic strategy. They’re either indecisive, or are deliberately avoiding being pinned down into clear, analytically defensible choices. I warned this would happen, and not due to the fault of any individuals. It’s a pathology within liberal internationalism.

Rather than dodging strategy in favor of endless crisis management, the White House ought to be asking a series of questions. What problem are we responding to? What are we trying to achieve? How will 301s and tariffs further that?

If your problem is Chinese influence abroad and your aim is to curb it, tariffs are precisely the wrong tool. Deterring firms from importing Chinese goods (or their own finished goods from China) will simply divert Chinese trade and capital to other locations around the world. And the more China can throw around cash, the more clout it will wield.

If your problem is the link between Chinese oligarchy and ethnonationalism (which I think is the core China problematique but that’s for another day), then tariffs are irrelevant. They simply don’t affect domestic inequality in China on their own.

In fact, the only strategic purpose that anti-subsidy tariffs advance is decoupling of the U.S. and Chinese economies. Yet, there’s very little evidence that Biden wants to decouple, and such a grand decision ought to be subjected to greater public debate if that’s the direction of things.

Ultimately, if we care about a foreign policy for the middle class, we shouldn’t be focused on Chinese industrial subsidies. We should be thinking about how to prevent U.S. firms from exploiting China’s oppression of its own labor pool and the environment. The tariffs under discussion are at best incidental to that.