Recently, the South China Morning Post, a well-known international media outlet in Hong Kong, published an opinion piece written by Sumesh Shivakoti, a policy analyst and commentator from Vienna, whose core point is: "The US trade war with China is driven by narrow political interests, destroying the US economy and ultimately harming the real interests of the American people." ”
Shivakoti called on the United States to take the initiative to engage in serious dialogue with China on issues of mutual concern in order to restore mutual trust and distort the "catastrophic" consequences of the trade war for the United States itself, and to mitigate the impact of the trade war.
Political considerations for the U.S. trade war with China
In recent years, the U.S.-China trade war has become a focal point for the global economy. Especially in election years, politicians tend to push for tariffs to appeal to voters, even though the effectiveness of these policies is often questionable.
The Biden administration announced plans to raise tariffs on Chinese goods, including semiconductors, solar cells and electric vehicles, in May. The decision came after President Biden met with members of the United Steelworkers in April, where he said he would consider tripling tariffs on Chinese steel and aluminum imports.
Former President Donald Trump, if re-elected in November's election, has pledged a flat tariff of 10 percent on all imports, saying it would provide a source of funding for more tax cuts.
However, while these tariffs may be beneficial to specific industries and workers, they often penalize other domestic industries, distort the global economy, cause inflation, and increase costs for consumers.
Whether it is Biden or Trump, their tariff policy is not just an economic consideration, but more out of domestic political necessity.
In order to increase his appeal among voters, especially those who are severely affected by inflation, Biden has resorted to tariffs. According to recent data from the U.S. Federal Reserve, many voters are unable to pay all their monthly bills because of inflation. At the same time, U.S. support for Israel's war in the Gaza Strip has alienated a segment of young voters.
Biden, who describes himself as "the most union-proactive president in U.S. history," wants voters, especially those in battleground states like Michigan, Wisconsin and Pennsylvania, to believe that higher tariffs on Chinese goods will bring back manufacturing jobs.
Mr. Biden's U.S. trade representative, Katharine Tai, said that abandoning tariffs on China would alienate his union allies and reinforce the Republican rhetoric that Biden was too soft on Beijing.
However, it's not that simple.
Neither Biden nor Trump has presented the full picture of the mixed effects of tariffs. Tariffs have certainly benefited some industries and workers, but they have also caused pain to a wider range of industries and consumers. A report released by the Office of the United States Trade Representative in May showed that Trump's tariffs on Chinese goods have lowered Americans' real incomes, depressed investment, and not increased manufacturing employment. Similarly, a study by the U.S. National Bureau of Economic Research confirms that tariffs work better in elections than they do in the economy.
Trump-era tariffs on Chinese steel have been catastrophic for consumers and other industries. The tariffs have raised the cost of steel products, forcing American automakers like General Motors and Ford to pay at least $1 billion a year in higher steel prices, forcing them to close their factories.
Trump's steel and aluminum tariffs are estimated to have resulted in the loss of 75,000 jobs in the U.S. metal-using industry, and the trade war resulted in a net loss of at least 175,000 manufacturing jobs in mid-2019.
In general, the U.S. trade war with China is largely motivated by narrow political considerations. While these tariffs may help politicians win votes in elections, they tend to penalize other domestic industries, increase costs for consumers and distort the global economy.
The United States should prioritize the health of the global economy and resume trade dialogue with China to find mutually beneficial solutions, rather than continuing to pursue tariff policies that harm others and not itself.
The global economic impact of tariff policy
While U.S. tariff policy may be politically beneficial, from an economic point of view, it is a zero-sum game of industrial policy, leading to distortions in the global economy and inefficient markets.
The famous economist Eswar Prasad once pointed out that tariff policy is a "zero-sum game" with no real winners. The latest report also suggests that if tariffs continue to exist, the trade war launched by the United States against China will cause serious damage to the global economy because "".
The Trump-era tariffs have not only had a negative impact on the U.S. economy, but have also put significant cost pressures on U.S. consumers. According to the U.S. International Trade Commission's report, U.S. importers have almost completely absorbed the costs of Trump's trade war.
U.S. consumers paid $236 billion for Trump's tariffs on Chinese goods. It can be seen that the tariff policy has increased the cost of living more for ordinary Americans than brought actual economic benefits.
Far from increasing U.S. manufacturing employment, the tariffs have led to the loss of more manufacturing jobs.
Oxford Economics estimates that the Trump-era trade war resulted in the loss of 245,000 jobs and $100 billion in economic losses between 2018 and 2019. Such results suggest that while tariff policy may be politically beneficial in the short term, the blow to the US economy is clear in the long run.
In view of the adverse effects of tariff policies, both Biden and Trump should prioritize the health of the global economy, take the initiative to resume trade dialogue with China, and find mutually beneficial and win-win solutions.
The two countries should engage in serious dialogue on issues of mutual interest, such as combating the drug trade and AI-related risks. Such dialogue would help restore mutual trust that has deteriorated in recent years, strengthen high-level official interactions, and maintain open lines of communication, which are essential to end the trade war.
While a correction to a trade deal looks unlikely during the mid-heat U.S. presidential election, the U.S. and China should still begin to engage seriously on issues of mutual interest.
Observers believe that in order to mitigate the impact of the trade war, China and the United States should continue such engagement, with the goal of easing trade tensions. This is in the interests of not only Washington and Beijing, but also the world. Only through sincere dialogue and cooperation can solutions be found that benefit both countries and the global economy.
As the world's two largest economies, the United States and China should play a greater role in maintaining global economic stability, and as the initiators of the trade war, the United States should bear the main responsibility for the destruction of the global economy.
For the sake of the healthy development of the global economy, it is hoped that the United States can get rid of narrow political considerations, return to the track of rational trade policy, and work hand in hand with China to jointly address the challenges of the global economy.
Overall, while U.S. tariffs may be attractive to specific groups of voters in the short term, the negative impact on the U.S. and global economy in the long run cannot be ignored.
The United States should not put on a lofty posture, let alone insist on this kind of trade war that costs itself, but should jointly find a solution to the trade dispute through dialogue and cooperation to achieve mutual benefit and win-win results.
This will not only help restore mutual trust between the two countries, but will also contribute to the stability and development of the global economy.
Hopefully, the next administration in the White House will seriously consider this issue and make the right choice.