Several economists have analyzed that the next US government is likely to increase tariffs on China. The focus of presidential candidates Trump and Harris on this issue has shifted from whether to implement tariffs on China to how to make these tariffs achieve the best effect.
Regardless of who wins the White House in November, tariffs on China are expected to continue to exist, according to Washington’s consensus. It is anticipated that Democrats and Republicans will implement tariffs in different ways. Meanwhile, who will bear the costs of these tariffs remains a focal point of discussion.
The Trump administration imposed high tariffs on Chinese goods worth over $300 billion in response to a series of unfair trade practices by China, including Chinese companies and individuals stealing US intellectual property.
After taking office, Biden maintained Trump’s tariff policy and increased tariffs on $18 billion worth of Chinese goods in May this year, including electric cars, solar panels, medical equipment, lithium batteries, steel, and aluminum.
It is evident that both administrations have used tariffs to create a level playing field for American manufacturers domestically, avoiding China dumping surplus products in the US market at prices below market value. They believe that without these tariffs, American manufacturers would continue to lose market share and face the risk of layoffs and reduced job opportunities.
A survey by the Cato Institute in August showed that most Republicans and Democrats support their own party’s tariff policies but oppose tariff rules from the opposing party.
Trump has repeatedly mentioned at campaign rallies that he will increase tariffs on China to 60% and impose at least 10% tariffs on goods from other countries. On September 5, during a speech at The Economic Club of New York, he stated that he believes protective tariff policies can bring long-term benefits and economic improvements to Americans. If he wins, he has suggested that future tariff rates will be higher than before, implementing stricter tariff measures to protect the domestic market.
“For a higher and better future for Americans,” Trump stated. “We must take care of our country and industry first.” Trump also hinted that future tariff rates will be “higher than what people have heard in the past.”
As for Harris, her stance on tariffs is still unclear. If she continues the current government’s policy, tariffs will remain in place. The Biden administration is expected to announce the final tariff decision soon. The decision was originally planned to be announced by the end of August.
Nick Iacovella, Senior Vice President of the Coalition for a Prosperous America, a US manufacturing advocacy group, stated that tariffs are the government’s “core solution to solving problems.” If tariffs are used in conjunction with other trade and industrial policies, it can promote investment in key American industries.
“Countries around the world have recognized that China’s excess production capacity will have a severe negative impact on their industrial capabilities. Therefore, they have also followed the US in imposing tariffs on Chinese goods,” Iacovella told The Epoch Times. “Whether under the Trump administration or Harris administration, this situation will continue.”
When Trump imposed tariffs on Chinese goods in 2018, it sparked opposition from many economists. Traditional free trade theory argues that tariffs distort markets, reduce competition and market efficiency, while slowing economic growth. In addition, tariffs also raise retail prices and reduce consumers’ actual income.
Erica York, Senior Economist at the Tax Foundation, a US tax policy monitoring organization, told The Epoch Times that even if multiple groups (such as exporters, importers, and consumers) share the cost of tariffs, it does not change the fact that tariffs reduce overall income and output.
Her analysis estimates that the tariffs implemented from Trump to Biden will reduce long-term Gross Domestic Product (GDP) by 0.2% and decrease 142,000 full-time job opportunities.
As the full impact of tariffs is difficult to assess, the Coalition for a Prosperous America chose to study the impact of tariffs on a single product – washing machines – from 2018 to February 2023.
The organization found that Korean companies created over 2,000 new jobs in the US after setting up factories due to these tariffs. The study also indicated that in the US, washing machine prices rose by 12% in the initial six months due to tariffs but returned to pre-tariff levels in the following 14 months.
Paula Mints, Chief Analyst at SPV Market Research, specializing in the solar industry, stated that the impact of tariffs varies in different sectors. In the solar industry, as China controls over 90% of the global supply chain, without tariffs on Chinese products, the US cannot establish its own solar manufacturing industry.
Mints told The Epoch Times that since Trump imposed a 25% tariff on solar cells, which was doubled by President Biden, “we are just beginning to build a domestic (solar) industry, just starting to own it. All of this is because of tariffs, manufacturing incentives, and demand-related incentives.”
She noted that these tariffs are complemented with incentives, encouraging manufacturers to set up factories in the US. She pointed out, “The Biden administration is using these tariffs to create a fair market competition environment.”
William Lee, Chief Economist at the Milken Institute in California, considers himself as “one of the few economists who actually think tariffs are not that bad.”
Lee told The Epoch Times that there is a difference between the market in the real world and the ideal solution of free trade because distortions such as government subsidies exist in the real world. Therefore, if used properly, tariffs can serve as another measure to balance distorted markets and make the situation more reasonable. Although tariffs incur costs and raise consumer prices for US importers and consumers.
However, “current strategic demands exceed the costs of tariffs,” he said. “In some industries, especially the high-tech sector, the strategic need for industry diversification has become extremely important post-COVID.”
Lee believes that since the Democrats and Republicans have already reached a consensus on their policy goals of establishing secure and reliable supply chains, he thinks the future US government will use tariffs in a “more strategic manner”, including formulating a series of incentive policies to support and protect critical American industries, rather than solely relying on tariffs to save jobs in declining industries, and using tariff revenues to compensate groups affected by price hikes.
Although both parties agree to use tariffs to restrain China’s dumping behavior, their policies and approaches may differ.
Mints stated that Trump views tariffs as “retaliatory and aggressive” measures, a stance that may continue into his second term. She also thinks that Trump does not believe tariffs will affect consumers, while the Biden administration sees tariffs as increasing buyer costs.
Lee believes that the Democrats tend to disclose more government directives on accompanying measures, domestic incentive policies, fund allocation, and usage, while the Republicans would grant more discretion to businesses. He expressed that people need to understand that tariffs and related protections are temporary and if the next administration finds that tariffs are harming specific consumer groups or businesses, they should use a portion of tariff revenue to subsidize affected groups.
Derek Scissors, Chief Economist at the China Beige Book, an independent research institution, and Senior Research Fellow at the American Enterprise Institute in Washington, also observed the different approaches of the two parties on tariff policies.
Scissors told The Epoch Times, “The (Biden) administration seems to view tariffs as necessary because of (Chinese Communist Party’s) behavior, while Trump uses them as a negotiating tool.”
He stated that he prefers to use quotas instead of tariffs because quotas can directly target the predatory behavior of the Chinese Communist Party and US concerns about dependence on China. Scissors said, “In the supply chain, quotas are about content limits, specifically targeting Chinese operators, not all producers.”
Iacovella believes that Trump will take a tougher stance on tariffs and industrial policies than Harris because Trump has a “deeper understanding of the threat posed by China (CCP).” Iacovella said, “One very important point is that regardless of who becomes president, the government will support tariffs.”
(John Haughey contributed to this report)