During the first two decades of the 21st century, the prices of many consumer products on American store shelves fell. A wave of imports from China and other emerging countries has driven down prices for items such as video games, T-shirts, dining tables and home appliances.
These imports have forced some U.S. factories out of business, putting more than 1 million workers out of work. Discount stores and online retailers such as Walmart and Amazon thrived by selling low-cost products made overseas. But voters pushed back. In 2016, Americans suffering from factory closures, crumbling industries, and long-term stagnant wages elected a president who vowed to fight back against China on trade. Four years later, they elected another member.
In separate but overlapping efforts, former President Donald J. Trump and President Biden are trying to revive and protect American factories by making Chinese goods more expensive to buy. It taxes imports from legacy industries such as clothing and electronics that have been hollowed out over the past quarter century, as well as emerging industries such as solar panels that are struggling to grow amid global competition from China.
Biden’s decision Tuesday to codify and expand tariffs imposed by Trump comes as the U.S. embraces trade with China, emphasizing gains on low-priced products over losses on geographically concentrated trade goods. It has become clear that an era that lasted several decades has come to an end. Manufacturing jobs. The single tariff represents the end of that. 100% tax on electric cars in China. Electric cars start at less than $10,000 each and are flooding showrooms around the world, but they have struggled to break through government barriers to the U.S. market.
Democrats and Republicans used to be driven by the theory that the United States could benefit by outsourcing production to countries that could make certain products more cheaply, in part by paying workers lower wages. We cooperated in order to cooperate in the field. Economists knew that some U.S. workers would lose their jobs, but they would provide consumers with lower prices and companies would be free to invest in high-value industries where the U.S. has an advantage in innovation. He said that by doing so, the economy as a whole would grow.
Political parties are now competing to sever these ties. Lawmakers have taken an increasingly hard line against China’s labor practices, intellectual property theft from foreign companies, and generous subsidies for factories that produce far more than Chinese consumers can afford. I’m strengthening it.
It’s unclear what new era of policy decisions will emerge from these political motivations, whether it’s Biden’s strategic industrial policy, Trump’s retrenchment to a more self-sufficient domestic economy, or something entirely different.
It’s also unclear whether Americans, still reeling from the steepest explosion of inflation in 40 years, can endure the pain of a transition.
“The old consensus has collapsed, and no new consensus has emerged,” said David Autor, an economist at the Massachusetts Institute of Technology who helped lead pioneering research into what became known as the early China Shock. said. In the 2000s, China’s entry into the World Trade Organization led to the disappearance of manufacturing jobs around the world. developed world.
But Orter cautioned that consumers and voters “cannot have it both ways.” You can make trade-offs. Everything in the world is a trade-off. If the United States wants to maintain and even get to the point of regaining leadership in these technology areas, it will have to pay more. And it’s not clear that it will work. ”
Despite mutual acceptance of forms of protectionism, Biden and Trump are offering voters contrasting views on how the U.S. economy should interact with China in their rematch elections.
Mr. Trump wants to destroy the bridge of commerce between the world’s two largest economies and dramatically limit trade overall. He has pledged to rescind the “most-favored nation” trade status Congress gave China at the end of the Clinton administration, raise tariffs on all Chinese imports and ban some Chinese products entirely. He plans to impose new taxes on all imports from around the world.
Trump has outspokenly maintained that China, not consumers, will pay for the tariffs, although detailed economic studies contradict him. But former U.S. Trade Representative Robert Lighthizer, who remains influential in Trump’s trade talks, told a New York Times reporter late last year that he wanted more manufacturing jobs in exchange for higher consumer prices. He said it was worth it.
“There are people who think consumption is over,” Lighthizer said. “In my opinion, production is over and so are safe and happy communities. We should be willing to pay that price.”
Biden has rejected Trump’s proposal as too broad and expensive. He wants to use tariffs and other regulations to build defensive fortresses around strategic industries like clean energy and semiconductors. Biden is also giving billions of dollars in government subsidies to companies in these areas, including green energy technology through the Inflation Control Act.
“We need a combination of investment and trade enforcement to ensure that the recovery we are seeing across the country is not undermined by a flood of undervalued exports from China,” said Lael Brainard, head of the White House National Economic Council. Stated. Thursday’s speech. “We have learned from the past. There can be no second China Shock here in America.”
Many economists who continue to support easing restrictions on trade with China have criticized both candidates’ plans, but not simply because they risk raising prices for U.S. shoppers. do not have. They say Trump and Biden’s policies could slow economic growth. Cutting out Chinese competition could force businesses and consumers to spend money on artificially expensive domestic products rather than innovative new products that create new industries and new jobs. they say.
R. Glenn Hubbard, a Columbia University economist who led the White House Council of Economic Advisers under former President George W. “Gender will be compromised.”
Some Democrats say Mr. Biden’s best hope for building a durable and successful trade policy with China is to reduce spending, including possible additional subsidies for semiconductors and other high-tech manufacturing. They argue that the aim is to expand and further strengthen enforcement. Sen. Sherrod Brown, D-Ohio, a longtime China and trade hawk in Congress, urged Biden to completely ban Chinese electric vehicles.
Jennifer Harris, a former Biden aide who now heads the economic and social initiatives at the William and Flora Hewlett Foundation, has called for stricter rules on industrial policy spending and what recipients of that money can do with it. He called on the government to tie the knot. He has proposed, for example, an obligation on domestic automakers to step up their transition to electric vehicles and stock buybacks to force companies that receive government subsidies, such as semiconductor manufacturers, to invest more in research and development. They want more restraint.
“This is the beginning of a more difficult chapter in the history of U.S. industrial policy that I think has not been attempted much before,” Harris said, adding that “industry has actually proven that “There is,” he said.
He added that voters will be dissatisfied with Biden’s policies if they don’t quickly lower prices for American-made goods. “Americans want both, and they will be unhappy if prices go up,” she says.
Opinion polls show voters are already extremely unhappy about rising prices related to supply chain disruptions and government and central bank stimulus as the world emerges from the coronavirus recession.
Inflation concerns are weighing on Biden’s re-election chances. Mr. Biden’s current and former aides are hopeful that even if he were to win a second term, it would not discredit his economic policy strategy. Continued price increases from new tariffs could also hurt Trump’s support if he retakes the White House.
These political issues are raising uncertainty about the direction China policy will ultimately take in the new era. Mr. Hubbard wants to back away from protectionism and re-adopt what he calls a more traditional view on trade policy. That means enforcing global rules, investing heavily in national innovation to maintain an edge, and trade policy when industries are lost. Its global rival is spending millions to retrain laid-off workers so they can find new jobs.
He acknowledges that American voters have little appetite for such policies. So is Harris. “The idea of showing this film again, knowing the political fallout from the first round, is complete suicide for me,” she said.
Economically speaking, Autor said he doesn’t want to go back to the days before China trade. He generally praised Biden’s industrial efforts, including his China policy, but said the president should “give up” on aid to parts of the economy where China keeps costs extremely low, such as solar cells. ing.
His latest research warns of the economic dangers of poorly designed trade policy, but also explains why presidents continue to pursue it. In his recent paper, co-authored with several economists, Mr. Autor said that Mr. Trump’s tariff-focused approach was not successful in bringing many factory jobs back to the United States.
But economists found that the policy appears to have won more votes for Trump and his party.
