President Joe Biden’s recent announcement of new tariffs on Chinese goods has sparked discussions about their impact and purpose. However, it is crucial to understand that these tariffs will have minimal effects on both Chinese trade and the broader U.S. economy. In fact, they only account for 4 percent of imports from China last year and a mere 0.07 percent of the total U.S. gross domestic product. Treasury Secretary Janet Yellen confirmed that these tariffs would not cause inflation, largely because their relative impact is insignificant compared to trade or economic activity.
Instead of focusing on the economic impact, it is more important to consider the range of goods that President Biden has chosen to tariff. These goods, including electric vehicles (EVs), medical supplies, and steel, do not seem to have a specific theme or focus. However, they have raised concerns within the American industry and government for various reasons.
For example, the Biden administration has imposed a 25 percent tariff on medical latex gloves from China. In recent years, China has held over a 90 percent market share in these and related medical products. The COVID-19 pandemic revealed the risks of relying heavily on Chinese imports when China effectively blackmailed the United States by restricting access to crucial medical supplies. By placing tariffs on these goods, the administration hopes to encourage U.S. and foreign manufacturers to take a larger share of the market.
The administration has also levied tariffs on products such as solar panels, cranes used in ports, and EVs. While President Biden used a trade law to address unfair trade practices and violations of trade agreements, these products also present clear national security risks. The FBI discovered intelligence-gathering electronics on Chinese-made cranes last year, raising concerns about potential espionage activities.
This risk extends to EVs as well. Research conducted by the founder of New Kite Data Labs highlights the data collection capabilities of Chinese-made internal combustion engine automobiles and EVs. Modern vehicles are filled with electronic sensors that collect vast amounts of data, monitoring and controlling various aspects of the car’s operations. This data includes onboard internet connections, brakes, location, voice activity, and even external factors like obstacles and speed limits. These data collection capabilities pose significant national security concerns.
While the hope is that U.S. and foreign manufacturers will opt for competing products from domestic or non-Chinese foreign producers, a more comprehensive approach is needed to address the trade and economic environment with China. Merely imposing tariffs on a limited range of Chinese products will not be enough to bring about lasting changes.
Some Chinese firms have established manufacturing plants overseas, intending to export the same risky products to the United States from countries like Mexico, where there is an existing trade agreement. Simply shifting the manufacturing location does not eliminate the risk if the products are still manufactured by Communist Party-controlled firms.
To truly tackle the China challenge, the United States must prioritize and allocate necessary resources towards making fundamental changes in economic activity. This could involve setting clean tech standards for manufacturers in allied countries and blocking imports from firms rather than specific sources of manufacturing.
In conclusion, while the tariffs imposed by the Biden administration are a step in the right direction, they are not the ultimate solution. The United States needs broader policies that can effectively address the challenges posed by China and establish a new vision for the 21st century. Merely relying on tariffs is insufficient to bring about lasting change.
