Of all the top appointees by President Biden, Katherine Tai has been at the forefront of supporting the continuation of the Section 301 tariffs imposed on around $350 billion worth of imports from China. She was at it again at the Aspen Security Forum on Dec. 7.
Ending the 301s would be “insensitive to the dynamics in the global economy and the U.S. economy,” she said during the Forum. She said that the days of enacting trade agreements that lowered domestic tariffs in exchange for the partner country to lower its tariffs for U.S. goods have reached the twilight of its years. “That view started to show its age in the 2000s,” she said.
Besides, not even Europe has a base tariff rate as low as the U.S., which averages out at around 3% across product lines for members of the World Trade Organization.
“The decisions you make on international economic policy impacts your domestic economy. We sit at that intersection between domestic economic policy and international and it is an uncomfortable intersection because these two forces are often pushing you in different directions, if not opposite directions. What we do internationally has to be connected to what objectives are, and what our challenges are here at home.” – Katherine Tai during discussion at the Aspen Security Forum, Dec. 7, 2023.
On Capitol Hill, one can count on one hand the number of Senators who have been pushing for more free trade agreements. Those in support of such measures that harken back to the 1980s to early 2000s have asked for trade deals to be part of the Indo-Pacific Economic Framework, aka IPEF. They want the IPEF to be the kinder, gentler version of the Obama-era Trans-Pacific Partnership (TPP), a NAFTA for Asia that Trump killed in his first day in office.
Tai said the IPEF will never be a replacement for the TPP, and that there was no appetite, really, in the White House to even consider revamping that trade agreement with all of India, Australia, and Southeast Asia minus China.
On tariffs, Tai talked about the Section 232 steel and aluminum duties imposed under Trump and kept by Biden. Those duties were imposed due to the overproduction out of China. Although there have been some changes to this since Biden took over, namely imposing tariff rate quotas instead on European Union steel, for example, Tai said the U.S. “has to be able to be a steel producer, for national security reasons and basic economic reasons.”
In 2021, many people who favored the tariff policies of Trump were worried that the Biden administration would remove them and return to pre-2018 China policy. Biden did nothing of the sort. This year, even Treasury Secretary Janet Yellen said the 301 tariffs were here to stay.
During a press conference in India on July 16 ahead of a G-20 summit for finance ministers, Yellen told reporters that, “the China tariffs were put in place because we had concerns with unfair trade practices…and our concerns with those practices remain. Perhaps over time this is an area where we could make progress, but I would say it’s premature to use tariff removal as an area for de-escalation, at least at this time.”
Katherine Tai talks tariffs at the Aspen Security Forum in December 2023.
Katherine Tai spoke about the Biden administration’s decision to temporarily pull out of the World Trade Organization talks with about 90 members about the digital economy, primarily where cloud computing and other tech firms store their customers’ data. “What we did was withdraw our indicated support for three or four proposals in the ongoing WTO negotiations on an e-commerce agreement. We took a look at how this debate matches what we are saying back home. Because this is e-commerce, we are talking about negotiating the global digital economy and that is so much of our economy now. As we were looking, we thought that most of the proposal was fine, but a couple of those that deal with data storage and source codes – the conversation that we are having here about data has shifted since we put those proposals forward in 2018. As a result, we had to create space for us to come up with new positions in order to re-engage with those countries on this.”
The Section 301 tariffs are currently under review. Some exemptions of items that have not been reshored, or found new sources outside of China, are expected.
In September, the U.S. Trade Representative extended Section 301 tariff exclusions on 352 Chinese imports and 77 COVID-19-related items until Dec. 31 that were set to expire on Sept. 30. CPA supports these tariffs. In October, CPA chief economist Jeff Ferry published a report on what an optimal tariff rate might look like for the re-industrialization of the U.S. economy.
A Pro Tariffs Letter to Biden
On Nov. 21, Senators Sherrod Brown (D-OH) and Bob Casey (D-PA) sent a letter to President Biden in favor of the Section 301 tariffs, which are currently under review.
“These tariffs are essential to level the playing field for American workers to compete and counter unfair trade practices by China, which seeks to circumvent our trade laws, steal American technology, and cheat and bully its way to global economic dominance,” wrote the Senators. “We urge the Administration to maintain the Section 301 and Section 232 tariff regimes as we continue our work with partners and allies to forge a sustainable approach to trade policy that supports American workers and fair global economic competitiveness.”
For her take on tariffs, Tai may be going by what has become a landmark report from the United States International Trade Commission published in March. The ITC study said that its in-house economic modeling of the Section 301 and 232 tariffs revealed a significant bump in domestic production of steel, aluminum, and in at least 8 other items of the 10 sectors analyzed – from audio and video equipment, to the plastics industry.
U.S. domestic production of audio and video equipment rose to an estimated $8.1 billion in 2021, from $2.7 billion in 2017, the year before tariffs were enacted. The ITC included automotive parts in their study, and those numbers remained flat in value terms as the U.S. continues to source from Mexico.
“The Chinese government does not play by global rules-based order,” Sens. Brown and Casey wrote. “The U.S. should consider the Chinese government’s long-standing practice of using economic coercion and supply chain retaliation as a geopolitical weapon when taking action that could undermine efforts to shore up our domestic manufacturing and supply chains.”
CPA Improves Leading Trade Model to Reflect Real-World Effects of Trade
