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What is it good for?

“We have all the cards, but we don’t know how to use them,” Donald Trump declared in 2015 when he announced his candidacy for president, moments after descending the golden escalator in Trump Tower.

He talked about his favorite adversary, China, and how he would hire people to transform America’s approach to fighting unfair trade practices. “We could turn off that tap by taxing them until they behave properly,” he boasted.

Nearly a decade later, I’m not sure the US has gotten any better at countering Beijing on the global economic stage. But one thing is clear: we are all playing Trump’s card game now.

President Joe Biden this week announced new tariffs on a range of Chinese goods, the culmination of a yearslong investigation into what, if any, changes should be made to his predecessor’s punitive tariffs on China. Essentially, the finding left all of Trump’s tariffs in place and then replenished.

But what is the end game here?

The obvious answer is: fight back against China. As Washington coalesces around the idea of ​​Cold War-style competition with Beijing, imposing tough trade sanctions feels right.

But we must judge this acute shift in trade policy against the real goals we are trying to achieve, and that means defining the problem in more specific terms.

Is it true that the US needs more manufacturing jobs?

Is it true that the US needs to make things in certain strategic sectors?

Should China change its behavior?

Is it true that we do not want to be specifically dependent on China for certain goods?

These are not mutually exclusive, but they are different issues, some of which rates are better suited to address than others. The Biden administration’s announcement this week seems mainly aimed at boosting US production in specific sectors, especially in combination with green energy subsidies in the major investment package that Democrats passed in 2022.

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It seems quite likely that this will succeed, as this is the way industrial policy has traditionally been applied around the world.

But Biden is also selling these policies as an effort to promote jobs. It may boost employment in those sectors, but it’s not at all guaranteed to increase manufacturing employment overall — people could simply switch from one set of manufacturing jobs in one sector to another that Biden favors gives, such as making electric vehicles.

Even after Trump’s broad tariffs on Chinese goods, manufacturing jobs remained broadly stable.

And industrial production is not the same as manufacturing jobs either. The sector as a share of the US economy hasn’t really declined much over the past seventy years, once you factor in inflation. Fewer people are working in these jobs because much of it is now automated.

What about China itself? Here Biden and Trump appear to have qualitatively different goals.

Top Biden administration officials have emphasized the need to strategically reduce our dependence on China in U.S. supply chains, an approach that has been called “de-risking.”

It is an attempt to be more targeted than Trump’s proposal to impose 60 percent tariffs on all Chinese goods.

Trump’s former top trade negotiator, Robert Lighthizer (who would also likely be in line for the top job if the Republican candidate wins a second term), has advocated a more comprehensive break with Beijing to eliminate our persistent bilateral trade deficit. He calls it ‘strategic decoupling’.

But unraveling China’s presence in US supply chains would require far more extreme measures than just tariffs and would be extremely disruptive to an economy that has already undergone the process of globalization.

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Companies are already shifting parts of their production out of China, in response to both actual policy and political tea leaves, but recent research suggests that U.S. exposure to China is not particularly declining, just less direct.

Tim Fiore, who oversees manufacturing surveys at the Institute for Supply Management that are considered benchmark indicators of the state of the economy, recently told me that this is because it would lead to a large increase in costs for companies to stop purchasing from China, at a time when people are already dissatisfied with high prices.

“If the industry hadn’t made these big steps 25 to 30 years ago, you wouldn’t have the quality of life you have in the United States today,” he said, estimating that many product inputs could cost as much as 30 percent. 40 percent more. That would have made purchasing everyday goods much more expensive for Americans.

Indeed, there is some irony that tariffs are more popular at a time when inflation is one of the biggest economic concerns and unemployment has been below 4 percent for more than two years. Tariffs may not increase overall inflation, but by definition they increase the costs of the products they apply to, which feeds into the prices consumers pay.

Retaliatory tariffs could also be quite damaging to the affected sectors, a price most borne by the agricultural sector after the Trump tariffs.

It’s a difficult decision, and it’s not the only one.

Notably, Biden is effectively preventing consumers from having access to $10,000 Chinese-made electric vehicles through his announcement this week.

In fact, Biden is choosing to make the green transition more expensive for consumers in order to control China.

But an official from the U.S. Trade Representative’s office argued to me that this is short-term thinking, and that the U.S. cares about ensuring we have a stable supply.

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There is also clearly a desire within the administration to avoid a second China shock in what Biden would call “the industries of the future.” In fact, even some old-school industries still warn of the dire threat from Beijing.

The National Council of Textile Organizations, whose members include making yarn and fabric, warned this week that three domestic textile manufacturers had announced closures in recent days, citing Chinese products flooding global markets.

It is true that tariffs protect domestic industries.

But they also come at a cost, and we need to make sure the cost is worth what we get. Michael Froman, Barack Obama’s former top trade negotiator, says policymakers will have to develop a framework for this.

“The whole field of economics and certainly the whole approach to free trade is based on the idea of ​​efficiency,” Froman told me. “We have now come to the conclusion, I think rightly, that this is not the only value. That the cheapest supply chain, wherever it is located, is not the only criterion. We want resilience. We want redundancy. We want safety.”

“But I don’t think we have an economic theory that says, ‘Okay, that’s the efficiency paradigm. Here is the alternative paradigm. This is how you optimize for inclusive growth, diversification and national security, in a world where we do not just strive for efficiency.’”

This whole conversation is, of course, frustrating for free-trade economists who think everyone has forgotten the extensive benefits of fewer trade barriers: higher-quality products that come from more competition, more prosperity, and less extreme poverty, to name a few. .

However, it seems pretty clear that this isn’t the conversation we’re having anymore. As Lighthizer wrote in his book, “The process of strategic decoupling has already begun.”

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