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Sourcing Journal

Trump, Harris and China Weigh in on Tariffs Ahead of Impending Increases

Kate Nishimura
6 min read
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In the wake of the Biden Administration’s deferral of a final determination on steep tariff increases on China-made industrial goods, presidential candidates Donald Trump and Kamala Harris are seeking to make their positions known.

The U.S. was scheduled to implement a 100-percent tax on electric vehicles, a 50-percent tariff on semiconductors and solar cells, and a 25-percent duty rate for lithium-ion batteries, aluminum, steel and ship-to-shore cranes in August as a part of President Biden’s economic plan, released in May—but blowback from American industry prompted a review of the decision that would take public comments under advisement.

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The Office of the U.S. Trade Representative (USTR) on Aug. 30 released a statement saying it “continues to work to finalize the determination” and it intends to release a final judgment on the tariffs in the coming days.

Despite the concerns of certain U.S. entities reliant on Chinese technology and raw materials, the trade war rages on. And in the 59-day lead-up to the election, neither ticket wants to appear soft on China.

Former president Trump has repeatedly extolled the virtues of duties on foreign-made products. He took to the stage at the Economic Club of New York on Thursday, giving a rambling, hour-plus long speech in which he referenced tariffs 27 times.

Trump outlined an economic plan based on building up American industry in large part by taxing imports. “The key to this effort will be a pro-American trade policy that uses tariffs to encourage production here and bring trillions and trillions of dollars back home,” he said.

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The Republican nominee said he’d start by slashing the corporate tax rate from 21 percent to 15 percent for companies that make products in the U.S. “If you outsource, offshore, or replace American workers, you’re not eligible for any of these benefits. In fact, you will pay a very substantial tariff when a product comes in from another country,” he said.

He claimed that America’s “vast manufacturing wealth” was cultivated “at a time with very little domestic taxation, few regulations, and most revenue came from tariffs from other countries”—a framework he said the country should return to in the present day. “That was when we were at the wealthiest ever, proportionately,” he added.

Trump has maintained that he would up punitive duties on China-made goods to a rate of up to up to 60 percent, and he has also floated an “All Tariff Policy” wherein goods from anywhere in the world would face a universal, 10-percent to 20-percent duty rate.

“We impose lower tariffs and no tariffs on foreign producers,” he said Thursday. “We have the lowest tariffs of any nation in the world, and we relentlessly punish our own companies for doing business in America.”

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But many are skeptical of the former president’s plan, including those on the same ideological spectrum.

Desmond Lachman, a senior fellow at conservative Washington, D.C. think tank the American Enterprise Institute said that “Trump is proposing a very much more aggressive and go it alone trade policy than he pursued in his first term”—and it’s reminiscent of the “highly unfortunate” 1930 Smoot-Hawley Tariff Act that historians have credited with aggravating the Great Depression.

“It is difficult to see how such a unilateral trade policy in flagrant violation of World Trade Organization rules would not lead to retaliation by our trade partners with import tariff increases of their own,” the former deputy director of the International Monetary Fund’s (IMF) Policy Development and Review Department wrote. “As in the 1930s, that could lead us down the destructive path of beggar-my-neighbor trade policies that could cause major disruption to the international trade system.”

According to Lachman, Trump’s proposal could be uniquely detrimental to American exporters, and could even “heighten the chances of both a U.S. and worldwide economic recession.”

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Trump railed against the notion that the tariffs he implemented have heightened or underscored the effects of inflation last week. “Smart tariffs will not create inflation,” he said. “In my first term, we imposed historic tariffs with no effect on consumer prices or inflation.”

But the AEI senior fellow said “voters should be warned not to expect the same satisfactory economic performance in a potential second Trump term as we had in his first term in office.”

With more radical plans taking shape, “Other untoward consequences of Trump’s proposed trade policy are that it would add to every household’s tax bill and it would increase inflation both directly and by stifling foreign competition.” Lachman pointed to research from the Peterson Institute of International Economics released earlier this year that estimated that higher tariffs on foreign products could add $2,600 to the average American household’s tax burden.

Vice President Harris, whose campaign began less than two months ago, has only begun to wade into the issue on the campaign trail.

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In a speech about her economic plan in mid-August, she criticized Trump’s universal tariff proposal, saying, “He wants to impose what is, in effect, a national sales tax on everyday products and basic necessities that we import from other countries that will devastate Americans.” Costs are already too high on everyday items, from food to back-to-school clothes, she said. She estimated that carrying out the Trump plan would cost middle-class households up to $4,000 a year.

When it comes to China, it’s widely expected that the Democratic nominee’s trade policy will align with that of the current administration. Harris co-signed President Biden’s economic plan, released in May, which included the directive that the USTR impose staged tariff increases worth $18 billion on electric vehicles and industrial equipment.

And by and large, the 45th and 46th presidents’ China strategies haven’t showcased many remarkable deviations. Biden opted to keep Trump’s Section 301 tariffs, implemented in 2018 and 2019, in place, surprising many in the business community.

Harris appears to be following the lead of the current Commander in Chief. She’s remained mum on whether she would roll back or remove the existing China tariffs, though a campaign spokesperson said in a statement that she plans to “employ targeted and strategic tariffs to support American workers, strengthen our economy, and hold our adversaries accountable.”

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In a Tuesday note obtained by Bloomberg, Goldman Sachs economists said they don’t anticipate more tariff increases under a Harris administration. But Trump’s proposals, including taxes on critical goods from China, the E.U. and Mexico, could cause inflation to spike with a peak impact of 30 to 40 basis points on the Federal Reserve’s preferred price gauge, they believe.

Beijing, for its part, is making its sentiments known. After the USTR announced a second delay on the Biden administration’s decision on the forthcoming tariff rollout, China Ministry of Commerce spokesperson He Yongqian countered the U.S. should “immediately” lift all tariffs on Chinese goods. “China has made solemn representations to the United States on the issue of the 301 tariffs many times,” she said.

According to the spokesperson, imposing further tariffs on Chinese products is “adding insult to injury” when it comes to the U.S.-China trade relationship. The deferment of the decision “shows the Section 301 tariffs are unpopular among the U.S. public,” she added.

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