“Tariffs alone are not enough,” comments a Pennsylvania Democrat on the Trump administration’s attempt to reindustrialize the country.
Last week Politico sat down federal lawmakers and former government officials to discuss trade policy’s role in the Trump administration’s manufacturing agenda – a hot topic in Washington since the White House rolled out and then scaled back varying levels on tariffs on virtually all U.S. imports and then invited negotiations with its trading partners.
We’re still waiting to see what will come of virtually all those negotiations. But one panel focused entirely on the negotiations with China, featured bipartisan support for tariffs – even if the Democratic panelists couched that support differently – and noted the policy throughlines that connect the Biden and Trump administrations. Anyway: Have the results of the preliminary talks between the two nations been good?
“Maybe. I think tariffs alone and across the board were a mistake,” argued Rep. Chris Deluzio (D-PA). “I think China is where this should have started with focused efforts on (trade) enforcement, paired with the parts that I think is missing here at home: Industrial policy, investment in our workforce, encouraging investment and foreign investment for manufacturing.”
“You’ve argued that Democrats should not be against tariffs wholesale,” asked the moderator, a nod to a notable New York Times opinion the representative wrote. “Are 145% tariffs on China something Democrats should be behind?”
Responded Deluzio:
“Tariffs alone aren’t enough. Tariffs might play a role with a country like China as an enforcement tool, which I would be supportive of, especially in sectors like shipbuilding and steel, which has an important national security component. But tariffs aren’t gonna do the work alone, especially if we have sectors where there isn’t a manufacturing capacity we can flip a switch here at home or with our friends. So it depends, and it might be sector-specific, which to me gets to the problem of an across-the-board (tariff) approach, even when you’re talking about a country like China.”
Thea Lee, Deputy Undersecretary for International Labor Affairs during the Biden administration, agreed. “Tariffs need to be judicious, strategic, and need to communicate a purpose,” she said:
“There are many behaviors that China has that are extremely problematic for American workers and businesses: Wholesale violations of labor rights, including genocide in the Xinjiang region; subsidization of export sectors; in the past, currency manipulation. All those things are legitimate trade problems. But when you put an across-the-board tariff of 145%, you don’t communicate to China and you don’t communicate to American businesses what you want them to do differently.”
Lee was asked about the perceived overlap in China trade policy between the Trump and Biden administrations:
“I think the Biden administration was correct in trying to build a worker-centered trade policy, in trying to begin an industrial policy. Sure, I wish we had gone faster, but Donald Trump broke things. In his first term he broke trade policy, and that actually created the opportunity to make some needed changes. But in the second term, he’s smashed the infrastructure and the confidence and relationships we’ve had with our trading partners and the ability to plan for the business community.”
Gilbert B. Kaplan, who served as Undersecretary of Commerce for International Trade during the first Trump administration, pushed back:
“You have to start with the fundamental fact that the trade system was very harmful for a lot of manufacturers going back even before the World Trade Organization (WTO) but certainly since the WTO, and certainly since China joined the WTO. We just could not without an enormous amount of expense in the case of trade cases, or very unusual solutions, do anything for a lot of manufacturers. We had to do something different in the international trade area. That’s not the only area. As both Thea and the congressman have mentioned, we have to work to build up domestic manufacturing. But we needed to change the international trade system. And I think what the president has done in putting these tariffs on sends a very strong signal on that leg of the stool; that we are not gonna put up with unfair trade for the rest of time, which is what we’ve had to do in many industries.”
Kaplan then turned to an increased Congressional role in trade negotiations, for which the other panels had advocated:
“I think what Congress needs to do is pass a trade bill that takes on some of the same things the president is trying to take on. I’ve represented maybe 20 different industries, and at some point I realized that when they came in, they all had the same problem: There’s subsidies in foreign countries. There are low-cost (imports) that selling for less than their input costs in the United States. I can’t tell you how many CEOs came and said something like, ‘I make this lighting fixture and the Chinese are sending it in here for the cost of my inputs, much less anything I have to do to put them together and make a profit.’ The Congress hasn’t addressed that, and the president had to do it.
“One great advantage of the (latest) tariffs is they’ve put the penalty for failing to deal with unfair trade right up front. So, when the (United Kingdom) or the Chinese come in, they know if they don’t make a good deal, these tariffs are going on. When we negotiated most other agreements, we’d say, ‘if you don’t come to a deal, we’re gonna talk to the White House and they’re gonna take a tariff action.’ Well, nine out of 10 times they didn’t take the action and nobody believed it while we were negotiating anyway. Here, the action is on the table. So I think we’re gonna get a lot better deals, and I don’t think the tariffs are gonna stick around very long.”
Washington and Beijing have reached a trade détente, agreeing to lower tariffs for 90 days while the sides negotiate a larger deal. The Alliance for American Manufacturing argues the Trump administration should not make a deal of convenience and should call on Congress to repeal China’s permanent normal trade relations status so that a higher tariff rate can be made permanent. It remains to be seen where these negotiations will lead, but those 90 days will be up in mid-August. In the meantime, you can watch the entire panel interview here.