SOURCE / GT VOICE
GT Voice: China in better position in easing US tariffs impact
Published: Jul 18, 2021 09:18 PM
Illustration: Tang Tengfei/GT

Illustration: Tang Tengfei/GT


US Treasury Secretary Janet Yellen may be the highest-ranked official in the Biden administration to criticize US tariffs that remain in place on Chinese imports. "Tariffs are taxes on consumers. In some cases it seems to me what we did hurt American consumers," she told The New York Times in an interview published on Friday.

Yellen's comments came as the Biden administration still left intact the tariffs imposed by the prior administration on China. Just as US Trade Representative Katherine Tai suggested in an interview in March tariffs could be used as "leverage" in potential trade talks with China, the Biden administration may sincerely believe they are battling to win a better trade deal with China. 

In reality, tariffs may be backfiring on the US economy. Whether the Biden administration maintained tariffs for economic or political purposes, one of the consequences of these high taxes on imported goods was increased burden on companies and low-income households. Moreover, there is deepening concerns that inflation that accelerated in June at the fastest pace in 13 years may compromise a sustained US economic recovery from the pandemic.

The Biden administration needs to come to terms with the fact that continuing wielding the tariffs stick against China won't win Washington any concessions from China, but only inflicting more damage on domestic businesses and the broader economy. A study commissioned by the US-China Business Council said in January that the trade war has caused a loss of up to 245,000 US jobs, but a gradual scaling back of tariffs on both sides would boost growth and result in 145,000 additional jobs by 2025, according to media reports.

On the other side, it is also worth noting that China has increasingly stronger initiative to ease the impact of the US tariffs on its economy.

In the past, China pursued an export-led growth strategy, but circumstances have changed. As the central government has repeatedly vowed to make domestic consumption a bigger engine for economic growth, exports have declined as a share of the GDP in recent years. Last year, the "dual circulation" strategy became the newest of the Chinese economic guidelines. While keeping China open to the world trade under the "international circulation," it requires building a stronger consumption market at home under the "domestic circulation", with the aim of making the Chinese economy more resilient to outside shocks.

Of course, there are potential obstacles ahead, but China has an edge in a prolonged arm-wrestle against the US, with its strong economic strength that continues to develop. As long as the adjustment from over-reliance on foreign trade to improving domestic demand continues, China won't be at a disadvantage, but will have stronger initiative in its economic relationship with the outside world.

In short, China is on track to become the world's largest consumption market under the "dual circulation" strategy. The more resilient the Chinese economy is, the more self-defeating Washington's efforts to hurt bilateral trade will be.


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