NICK GOSNELL
Hutch Post
HUTCHINSON, Kan. — The tariffs announced May 14 by the Biden Administration on Chinese goods are actually tightening restrictions put into place by the Trump administration in 2018, according to Raj Bhala, Brenneisen Distinguished Professor of Law at the University of Kansas.
"The authority is Section 301 of the Trade Act of 1974, a Nixon-era trade weapon that can be used unilaterally to impose trade barriers, tariffs, for example, against foreign governments whose acts, policies, or practices are contrary to U.S. interests," Bhala said. "For example, being discriminatory or unjustifiable or unreasonable. And the Section 301 tariffs, which were imposed by the Trump administration initially in March 2018 through four different waves kind of across the Trump presidency, were reaffirmed all along, in fact, by the Biden administration."
Bhala said Biden's administration didn't see a need to change the focus of previous policy.
"Not a single Trump tariff under 301 is being removed by the Biden administration," Bhala said. "I would argue that Trump administration and Biden administration trade policy towards China are pretty much the same substantively. Not only did they reaffirm those tariffs, but in addition, they raised tariffs on an array of merchandise that are considered of strategic value for the U.S., strategic value economically or in terms of outright national security. And the increases in the tariffs on those strategic goods range from as low as 0 or 7.5 percent existing duty to as high as 100 percent, for example, on electric vehicles."
It's not that the overall number is high, but the symbolism is meant to be stark.
"The increases in duties will affect only about $18 billion worth of trade annually of Chinese origin merchandise that we import," Bhala said. "Already we have tariffs since, again, March 2018 and thereafter on about $300 billion worth of Chinese origin merchandise. In a way, we could say that the tariffs were really targeted to focus on economic and strategic interests and avoid inflation, exacerbating inflation, because the tariffs are phased in across three years, 2024, 2025, and 2026."
Will these actions by the U.S. provide cover for others to take on the Chinese? Bhala implies that's what it appears the administration would be looking for.
"President Xi, we are not backing down in the trade war, and likewise to our allies, the European Union, particularly the United Kingdom, go for it," Bhala said. "You guys also should be taking action against Chinese electric vehicles, lithium ion batteries, solar cells, steel and aluminum, personal protective equipment, and various critical minerals."
It's not that the Chinese are going to quit being a thorn in the U.S. side generally, though.
"If we're expecting that the 301 tariffs and the increases in them that have been announced are going to resolve the trade war by structural changes in the Chinese economy, subsidization, state-owned enterprise competition, intellectual property theft, cyber attacks, etc., no, that's not going to happen," Bhala said. "That's going to take a much broader and deeper conversation with the Chinese to convince them that it's in their interests to make the reforms that the U.S. has been seeking going on now almost eight years."
Will China respond? Bhala says they will.
"The immediate rhetoric out of Beijing was predictable, that we will respond, but they were vague on how they would respond. But we will respond, in effect, somehow tit-for-tat," Bhala said. "We, the Chinese, will also take note that you are violating the U.S., violating the World Trade Organization rules, and you are continuing, according to the Chinese narrative, to be a bully in world trade."
Bhala isn't sure that the response will be substantive. It may be just as symbolic as the Biden administration's initial action.
"The Chinese government is sophisticated, and they do see that President Biden is fighting for re-election," Bhala said. They may make the calculation that they are better off with a second Biden administration than potentially an even more hostile second Trump administration."
Trump, for his part, has talked tough on China in the campaign thus far.
"I think the Chinese government being sophisticated observers of U.S. politics and election campaign rhetoric are looking at both candidates, and they see stronger rhetoric and potentially stronger action from a new Trump administration," Bhala said. "I mean, he has, after all, candidate Trump, has threatened tariffs on all Chinese merchandise across the board, upwards of 60 percent is a number that's been thrown around, and some of the think tanks that back the Trump campaign have been putting out reports on taking tough action like that."
So what third actor outside of China and the U.S. wins with this new policy direction from the United States?
"India most notably has the biggest opportunity to benefit from higher tariffs on Chinese goods and an accelerated disengagement of the U.S. and Chinese economies and a continued flow of foreign direct investment out of China into India and an increase in trade values and volumes from India," Bhala said. "I would be watching very carefully the election going on now for Prime Minister Narendra Modi to be reelected, It would be his third five-year term in office. He came in 2014 and was reelected in 2019. And he is, without being too overt about it, he and the newer school of thinking in New Delhi is to more closely align with U.S. political, economic, and national security interests and strategies and gradually moving themselves away from Russia, knowing that their strategic threat is China. Do keep in mind that India is the one country that was actually invaded by China in October 1962, roughly during the Cuban Missile Crisis."
This actually could be of strategic advantage to the U.S., as China has a demographic problem that India does not.
"I mean, India is the largest, in a sense, the most populous country on earth. It surpassed China a few months ago as the most populous country," Bhala said. "The values roughly align with the U.S. in terms of democracy and pluralism, though there have been issues in India, as we all know, about those topics. India's got a growing young population."
A podcast of the full interview with Bhala is available below.
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