August 12, 2022
Taiwan Tensions Complicate Biden’s Next Move on China Import Tariffs
To fight inflation, the president has been considering removing at least some of the levies which have contributed to price increases in the promo products industry.
Rising tensions with China over Taiwan have complicated the Biden administration’s consideration of whether or not to lift some of the U.S. Section 301 tariffs imposed on hundreds of billions of dollars’ worth of Chinese imports under former President Donald Trump.
For months now, President Joe Biden has been evaluating possibly nixing or easing at least some of the tariffs as a means to help temper U.S. inflation, which ran at a rate of 8.5% in July and which has been near 40-year highs for months.
There’s debate over whether eliminating tariffs would have a tangible impact on runaway consumer and wholesale prices. Still, some high-ranking federal officials favor lifting at least some of the levies.
Biden has reportedly been weighing a possible combination of options that include eliminating certain tariffs, expanding a list of tariff exclusions to help domestic companies that don’t have options other than China for supplies, and investigating possibly adding more levies. All that, however, is now on hold because of escalating geopolitical strife with China over Taiwan, according to some sources close to the situation.
The heightened tensions come after U.S. House Speaker Nancy Pelosi visited Taiwan the first week of August in a show of support for the republic, which China sees as its own. Pelosi was the highest-ranking U.S. official to visit the island in 25 years, and Beijing took her presence as a provocation and affront, thereafter launching war games that involved ballistic missile launches and simulated strikes on Taiwan.
The visit and reaction have muddled how to proceed on tariffs, as Biden’s administration reportedly doesn’t want to be seen as weak in the face of Chinese aggression but also doesn’t want to intensify animosity with China.
“Certainly, it has made it a little more challenging,” U.S. Secretary of Commerce Gina Raimondo said in an interview with Bloomberg Television of Pelosi’s visit and China’s response in relation to tariffs. “It’s harder, but I am hopeful that we will get beyond that and get back to a place where we can have more of those discussions.”
One source told Reuters that they “think Taiwan has changed everything” regarding the discussion on the import levies. The White House said Biden hasn’t shelved the tariff consideration and will ultimately make a decision he believes is in the best interest of the United States.
Raimondo said Biden is proceeding cautiously on tariffs and that “we’ve talked about it again recently, and I expect he’ll be making a decision before too long.”
Tariffs, in general, make it more expensive to import products upon which the levies are placed.
Promotional products executives have said that the tariffs have contributed to increases on products in the branded merch industry. Promo executives have told ASI Media that removing or reducing tariffs on imports from China could potentially contribute to price reductions on products in the industry down the line, but that’s far from a given. Suppliers are facing other inflation pressures beyond tariffs, along with cost uncertainties, that could negate any potential benefit from tariff removal.
Meanwhile, removing or lessening the levies could also compel at least some promo suppliers to increase their sourcing from China, counteracting a trend of recent years that’s seen firms move more production out of that nation due to the tariffs and COVID-related issues. Even with that sourcing change, the majority of promo products sold in North America continue to be manufactured in China.
Some analysts say removing the tariffs will do little to nothing to help control the U.S.’s current inflation woes. The think tank Peterson Institute for International Economics has said removing all the Trump-era tariffs on Chinese goods would reduce the Consumer Price Index inflation by 0.26 of a percentage point at most.
Some top members of Biden’s administration, including U.S. Trade Representative Katherine Tai, favor keeping the tariffs in place. Tai and others believe the levies give the U.S. leverage in the difficult mission of trying to get China to play fair in international trade. Trump instituted the tariffs to combat what he and supporters characterized as China’s bad trade practices.