During the first two decades of the 21st century, many consumer products on American store shelves became less expensive. A wave of imports from China and other emerging economies has helped drive down the cost of video games, T-shirts, dining tables, appliances and more.
These imports bankrupted some American factories and cost more than a million workers their jobs. Discount stores and online retailers, like Walmart and Amazon, have thrived by selling low-cost goods made overseas. But the voters rebelled. Stung by shuttered factories, crumbling industries and prolonged wage stagnation, Americans in 2016 elected a president who pledged to fight back against China on trade. Four years later, they elected another.
In separate but overlapping efforts, former President Donald J. Trump and President Biden sought to revive and protect U.S. factories by making it more expensive to buy Chinese goods. They have taxed imports in traditional sectors that have been hollowed out over the past quarter century, such as clothing and household appliances, and in newer sectors that have struggled to grow amid global competition with China. China, like solar panels.
Mr. Biden’s decision Tuesday to codify and increase tariffs imposed by Mr. Trump made clear that the United States has ended a decades-long era that embraced trade with China and favored gains in lower cost products at the expense of the loss of geographically concentrated areas. manufacturing jobs. A single tariff rate embodies this shutdown: a 100% tax on Chinese electric vehicles, which start at less than $10,000 apiece and have burst into showrooms around the world but have struggled to break through. government barriers in the US market.
Democrats and Republicans once joined forces to engage economically with Beijing, motivated by the theory that America would benefit from outsourcing its production to countries that could make certain products more cheaply, in part by paying low wages to their workers. Economists knew that some American workers would lose their jobs, but they believed that the economy would gain overall by offering consumers lower-priced goods and allowing businesses to invest in higher value-added sectors where the United States had an innovation advantage.
Parties are now competing to break these ties. Lawmakers have taken increasingly hard lines on China’s labor practices, the theft of intellectual property from foreign companies and generous subsidies to factories that produce far more than Chinese consumers can buy.
It is unclear which new political era will emerge from these policy incentives: Mr. Biden’s strategic industrial policy, Mr. Trump’s retreat toward a more self-reliant national economy, or something else.
It is also not certain that American public opinion, still reeling from the most rapid inflationary surge the country has seen in 40 years, will tolerate the pain that could accompany the transition.
“The old consensus has been broken and no new one has emerged,” said David Autor, an economist at the Massachusetts Institute of Technology who helped lead pioneering research into what is now known as the Early China Shock. . 2000s, when China’s membership in the World Trade Organization helped eliminate manufacturing jobs around the world. developed world.
But consumers and voters, Mr. Autor warned, “can’t have it both ways. You can compromise. The whole world is made of compromises. If you want to get to the point where the United States maintains and regains its leadership in these technological areas, you will have to pay more. And it’s not certain that it will work.
Despite their mutual embrace of forms of protectionism, Mr. Biden and Mr. Trump offer voters contrasting views on how the U.S. economy should engage with China in their electoral rematch.
Mr. Trump wants to destroy trade bridges between the world’s two largest economies and drastically restrict trade overall. He has pledged to raise tariffs on all Chinese imports, revoking the “most favored nation” trade status that Congress voted to grant to China at the end of the Clinton administration, and completely banning certain Chinese products. It would impose new taxes on all imports from around the world.
Mr. Trump bluntly asserts that China will pay the cost of these tariffs, not consumers, although detailed economic studies contradict this. But Robert Lighthizer, his former trade representative who remains an influential voice in Mr. Trump’s trade discussions, told New York Times reporters late last year that it was worth swapping prices at higher consumption against an increase in employment in the manufacturing sector.
“There is a group of people who think consumerism is the end,” Mr. Lighthizer said. “And in my opinion, production is the end, and safe and happy communities are the end. You should be willing to pay the price for it.
Mr. Biden rejects Mr. Trump’s proposals as too broad and costly. He wants to build a protective fortress around strategic industries like clean energy and semiconductors, using tariffs and other regulations. Mr. Biden is also showering companies in these sectors with billions in government subsidies, including for green energy technologies through the Inflation Reduction Act.
“Investments must be coupled with trade measures to ensure that the return we are seeing in communities across the country is not undermined by a flood of unfairly undervalued exports from China,” said Lael Brainard, who heads the White House National Economic Council, in a statement. speech Thursday. “We have learned from the past. There cannot be a second China shock here in America.
Many economists who remain in favor of less restricted trade with China have criticized both candidates’ plans, and not simply because they risk raising prices for American buyers. They say Mr. Trump and Mr. Biden’s policies could slow economic growth. They say cutting off Chinese competition could force businesses and consumers to spend money on artificially expensive domestic products, rather than new and innovative products that would create new industries and jobs.
“We are going to hurt our productivity by spending heavily in these areas,” said R. Glenn Hubbard, a Columbia University economist who led the White House Council of Economic Advisers under former President George W. Bush.
Some Democrats say Mr. Biden’s best hope for building a lasting and successful China trade policy is to spend more, potentially including a new round of subsidies for semiconductors and other high-tech manufactured goods, and go further in the application of commercial policy. Senator Sherrod Brown, Democrat of Ohio, a long-time China and trade advocate in Congress, pushed Mr. Biden to ban Chinese electric vehicles outright.
Jennifer Harris, a former Biden aide who now directs the Economy and Society Initiative at the William and Flora Hewlett Foundation, has pushed the administration to pair its industrial policy spending with even stricter rules on what recipients of this money can do it. For example, she wants stricter mandates for domestic automakers to switch to electric vehicles, and tighter restrictions on stock buybacks to force companies benefiting from government subsidies, such as semiconductor makers, to invest more in research and development.
“It opens a much more difficult chapter that I think is much less attempted in the history of American industrial policy,” Ms. Harris said: “Really making the case to the industry.”
Voters will be unhappy with those efforts, she added, if Mr. Biden’s policies don’t help quickly lower prices for U.S.-made goods. “Americans want both, and they’re going to get cranky when prices go up,” she said.
Polls show voters are already extremely grumpy about price increases, linked to supply chain woes and government and central bank stimulus as the world emerges from the Covid-19 recession.
Inflationary concerns weigh on Mr Biden’s re-election chances. Current and former Biden aides hope they will not also discredit Mr. Biden’s economic policy strategy, should he win a second term. Consistently higher prices due to new tariffs could also hurt Mr. Trump’s approval rating, should he win back the White House.
These political questions raise uncertainties about the outcome of the new era of Chinese politics. Mr. Hubbard would like to see a rollback of protectionism and a return to what might be called more traditional views of trade policy: enforcing global rules, investing heavily in domestic innovation to maintain an advantage, and when you lose industries for the benefit of a global rival, spending big to retrain displaced workers so they can find new jobs.
He admits that the American electorate is reluctant to such a policy. Mrs Harris too. “The idea that we’re just going to make this movie again, knowing the political fallout from the first round, is complete suicide to me,” she said.
Mr. Autor said that, from an economic point of view, he did not want to return to the previous era of trade with China. He is generally complimentary of Mr. Biden’s industrial efforts, including his China policy, but says the president should “forgo” support for some sectors of the economy where China has cut costs to extremely low levels, like solar cells.
His latest research warns of the economic dangers of poorly designed trade policy, but it also explains why presidents might continue to implement it. In a recent paper, written with several fellow economists, Mr. Autor found that Mr. Trump’s tariff approach has failed to bring many factory jobs back to America.
But, economists found, this policy appears to have won more votes for Mr. Trump and his party.