US Trade Chief Says Targeted Tariffs Needed to Avoid China Shock

(Bloomberg) — President Joe Biden’s trade negotiator said the use of targeted tariffs is necessary to guard against China deluging the US with imports such as cars, clean energy and semiconductors.

Import duties on selected products in areas where the US is looking to attract investment represent the “defense” of the US game plan to prevent a second “China Shock,” US Trade Representative Katherine Tai said in an interview on Thursday. The term refers to the economic and social havoc that followed China joining the World Trade Organization in 2001, devastating industries including clothing, electronics, machinery and furniture, costing the US millions of jobs.

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“As an economic matter, as a political matter, as a societal matter, no matter who is in charge in the United States, we cannot withstand a ‘China Shock 2.0,’” Tai said in an interview on the sidelines of Asia-Pacific Cooperation Meetings in Lima, Peru. 

Still, she cautioned against the use of blanket tariffs such as those proposed by Donald Trump, who defeated Vice President Kamala Harris in last week’s election. He promised repeatedly during the campaign to impose a 10% to 20% tariff on all foreign goods and a tariff of 60% or higher on products coming from China.

“Tariffs are part of the solution,” Tai said, without naming Trump directly. 

But “just slapping them down doesn’t make them effective,” she added. “You have to have a theory for what you’re trying to accomplish. And for us, it’s about strengthening the American economy with an eye to these critical industries” that will be growth drivers for the coming decades, she said.

Biden kept in place most of the tariffs that Trump imposed during a trade war with Beijing, and increased duties on goods, from electric vehicles and semiconductors to solar cells and battery parts. The president also increased tariffs on Chinese products where his administration is looking to boost US production via industrial policy from the Inflation Reduction Act and Chips and Science Act, parts of the strategy that Tai characterized as playing “offense.”

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“One way to understand the challenge of China is the challenge of bigness, of their ability to dominate international markets, to drive out competition, and then to reap all the rewards and to take all of your choice away from you,” Tai said. “And so this conversation around economic security, economic coercion — which is very salient here in the APEC region — is all a part of what we have been working on these last few years.”

Biden is also pushing to make the US economy more inclusive and to make sure that mechanisms to increase inclusivity are incorporated in its trade agreements, a goal that’s shared by many other nations, Tai said.

“I am confident that this is the direction that the world economy needs to move in,” she said.

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