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The Trump Administration Should Not Reduce Tariffs on China

Nov. 11, 2019
Domestic manufacturers are counting on them becoming the new normal.

Right now, the Trump administration is considering potential cuts to the tariffs it has imposed on China’s exports since 2018. The tariff cuts would be part of a ‘Phase One’ agreement with Beijing intended to ease more than two years of trade tensions. However, reducing these tariffs is not the way to go. Not only have the tariffs reduced China’s exports to the US, but domestic producers are already embarking on costly expansion plans—since they have been operating under the assumption of continuing trade action.

Simply put, domestic manufacturers want the tariffs made permanent—and expanded. Thanks to the tariffs, domestic manufacturers that supply industries like defense, automotive, aerospace, and construction have finally found some relief from the massive flood of subsidized exports constantly streaming in from China’s many state-owned enterprises. These companies are now making major investments, including expanded operations, and new hiring of workers—particularly in strategically important industries like steel. If the tariffs were reduced, much of that new investment could be wasted. And that would shift the United States back to a failed economic doctrine of pursuing “cheap goods” at the expense of middle class job creation and industrial prosperity.

An analysis of federal data shows that, as the tariffs have taken hold, the year-to-date U.S. goods deficit with China has declined 12.8 percent from 2018. US firms have invested billions of dollars in new, state-of-the art facilities that can better compete against artificially subsidized exports from China. And as a result, domestic manufacturers are receiving new orders, opening new lines of production, and renovating existing buildings and production lines. Capacity utilization is up as well, with consumer prices remaining steady despite the initial predictions of trade critics. 

Much of this comes down to the message that the tariffs are sending. Steel mills and machine shops throughout the nation are banking on the security posed by long-term tariff support. No doubt, some are still holding off on building new facilities, though, until it’s clear that the tariffs are deemed permanent—and become the new “normal.”

Reducing tariffs would mean acquiescing to Beijing’s latest overtures. However, the United States has seen this situation time and again—Beijing simply head-faking U.S. negotiators, but never making real, substantive concessions. Yielding to Beijing now by reducing tariffs would surrender U.S. leverage at a particularly vulnerable moment. Many domestic manufacturers have enthusiastically supported the Trump administration’s aggressive trade strategy. And so, giving ground on tariffs would leave them in a troubling halfway position—with worrying implications for many communities that are now hoping for a manufacturing resurgence.

The Coalition for a Prosperous America (CPA) recently published a study showing that a permanent, across-the-board, 25 percent tariff on imports from China could offer a strongly pro-growth strategy for the US economy. Along those lines, it’s crucial that the Trump administration continue its tariffs in order to revitalize critical job-creating sectors while defending against China’s ongoing, predatory trade.

Michael Stumo is CEO of the Coalition for a Prosperous America (CPA).

About the Author

Michael Stumo | CEO

Michael Stumo is CEO of the Coalition for a Prosperous America, a nonprofit organization working at the intersection of trade, jobs, tax and economic growth.

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