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U.S. rethinks steps on China tariffs in wake of Taiwan response, sources say

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US President Joe Biden gestures as he meets with China’s President Xi Jinping during a virtual summit from the Roosevelt Room of the White House in Washington, DC, November 15, 2021.

Mandel Ngan | AFP | Getty Images

China’s war games around Taiwan have led Biden administration officials to recalibrate their considering on whether to scrap some tariffs or potentially impose others on Beijing, setting those options aside for now, based on sources acquainted with the deliberations.

President Joe Biden has not made a choice on the problem, officials said. His team has been wrestling for months with various ways to ease the prices of duties imposed on Chinese imports during predecessor Donald Trump’s tenure, because it tries to tamp down skyrocketing inflation.

It has considered a mixture of eliminating some tariffs, launching a recent “Section 301” investigation into potential areas for extra tariffs, and expanding a listing of tariff exclusions to help U.S. corporations that may only get certain supplies from China.

The tariffs make Chinese imports costlier for U.S. corporations, which, in turn, make products cost more for consumers. Bringing down inflation is a significant goal for Biden, a Democrat, ahead of the November midterm elections, which could shift control of 1 or each houses of Congress to Republicans.

But Beijing’s response to U.S. House Speaker Nancy Pelosi’s visit last week to Taiwan triggered a recalculation by administration officials, who’re eager to not do anything that could possibly be viewed by China as an escalation while also searching for to avoid being seen as retreating within the face of the communist country’s aggression.

China’s military for days took part in ballistic missile launches and simulated attacks on the self-ruled island of Taiwan that China claims as its own.

“I feel Taiwan has modified every thing,” said one source acquainted with the newest developments in the method, details of which haven’t been previously reported.

Exclusions list

A senior administration official made clear Biden had not reached a choice.

“The president had not made a choice before events within the Taiwan Strait and has still not made a choice, period. All options remain on the table,” the official said. “The one one that will make the choice is the president – and he’ll achieve this based on what’s in our interests.”

With probably the most forceful measures regarding tariff relief and tariff escalation largely on the back burner for now, focus is on the so-called exclusions list.

The Trump administration had approved tariff exclusions for greater than 2,200 import categories, including many critical industrial components and chemicals, but those expired as Biden took office in January 2021. U.S. Trade Representative Katherine Tai has reinstated only 352 of them. Industry groups and greater than 140 U.S. lawmakers have urged her to vastly increase the numbers.

The Biden administration’s next steps could have a big impact on a whole bunch of billions of dollars of trade between the world’s two largest economies.

U.S. industries from consumer electronics and retailers to automotive and aerospace have been clamoring for Biden to eliminate the duties of as much as 25% as they struggle with rising costs and tight supplies.

The tariffs were imposed in 2018 and 2019 by Trump on 1000’s of Chinese imports valued then at $370 billion to pressure China over its suspected theft of U.S. mental property.

Some senior administration officials, including Treasury Secretary Janet Yellen, had argued the duties were imposed on “non-strategic” consumer goods that had unnecessarily raised costs for consumers and businesses, and removing them could help ease rampant inflation. Tai argued the tariffs were “significant leverage” that needs to be used to press China for changes to its behavior.

Multiple aspects

Multiple aspects, along with China’s Taiwan response, have complicated the administration’s deliberations.

As U.S. officials considered eliminating a number of the tariffs, they sought reciprocal rollbacks from Beijing and were rebuffed, two sources said. A spokesperson for the Chinese embassy in Washington couldn’t immediately be reached for comment.

One among the sources, who said a unilateral removal of some U.S. tariffs on Chinese imports has been placed on hold, said this was done partially because China failed to indicate any willingness to take reciprocal actions or meet its “Phase 1” trade deal commitments.

That deal, reached at the tip of 2019 with the Trump administration, required China to extend its purchases of U.S. farm and manufactured goods, energy and services by $200 billion in 2020 and 2021 over 2017 levels. China fell well wanting these commitments, which included a $77.7 billion two-year increase in imports of U.S. manufactured goods, including aircraft, machinery, vehicles and pharmaceuticals.

The Peterson Institute for International Economics estimates that China effectively bought not one of the extra goods it promised. Beijing blamed the Covid-19 pandemic, which began just because the deal was signed in January 2020.

The U.S. Trade Representative’s office is now within the midst of a statutory four-year review of the tariffs imposed by Trump, which could take a number of more months to finish. Final public comments on whether to maintain them in place are due by Aug. 23.

Union groups led by the United Steelworkers have urged USTR to maintain the tariffs on Chinese goods in place to assist “level the playing field” for employees in the US and reduce U.S. reliance on Chinese suppliers.

Biden has been concerned about rolling back tariffs partially due to labor, which is a key constituency for him, and since of China’s failure to purchase the products it had agreed to buy, based on the primary source. The White House has declined to put out a timeline for when a final decision might be made.

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