Shortly after President Joe Biden nominated Katherine Tai to serve as United States Trade Representative (USTR), Ms. Tai pledged that the administration’s trade policies would be centered around helping American workers and protecting U.S. jobs. The administration’s approach to trade, she said, “must benefit regular Americans, communities, and workers.”
As the economic recovery progresses following the COVID-19 pandemic, it’s an approach that makes sense. However, it’s also one that will be almost impossible to achieve fully if the Biden administration doesn’t end the destructive trade wars that former President Donald Trump waged throughout the course of his term. These trade wars are detrimental to businesses and workers alike and will further restrict the economy’s ability to grow.
When President Trump started the trade war in 2018, he promised to level the playing field on trade by reducing our goods trade deficit with China and bringing manufacturing back to the United States. According to the Trump administration, tariffs were the primary tool to help accomplish those goals. Despite those lofty aims, neither outcome materialized.
Trump’s policies didn’t work because they didn’t understand exactly how tariffs work. They are taxes paid by importers to the federal government, and other countries don’t pay them. They are paid by the U.S.-based businesses who need those imports to create jobs and offer consumers products at affordable prices. As the tariffs increase, so do the costs American companies incur to do business.
In fact, despite the former president’s promises, our country’s trade deficit with China actually grew during his administration. And when surveyed last year, more than three-quarters of the more than 200 U.S. manufacturers near Shanghai said they had no intention of moving operations outside of China. The trade war failed to accomplish the Trump administration’s stated aims.
Meanwhile, recent findings from Moody’s show that China shouldered less than eight percent of the costs of the tariffs. As most experts predicted, those costs fell to U.S. businesses, and over the course of the trade war, around 250,000 U.S. workers have lost their jobs as a result. Without relief from these tariffs still in effect, businesses will continue to face the impossible task of keeping people employed and staying afloat.
These are mistakes President Biden and Ambassador Tai cannot afford to mimic when determining the trajectory for the administration’s trade policy. Rather than waiting on an independent review before repealing the tariffs – as Ambassador Tai indicated would be the administration’s approach shortly after her confirmation – the administration needs to immediately prioritize ending the trade war.
By providing immediate relief, the Biden administration can give American businesses the confidence to add jobs for hard-working people across the nation, and in turn, boost our recovery from the COVID-19 pandemic. Instead of worrying about whether they will need to cut jobs or raise prices, American businesses will be able to shift their attention to hiring new staff and expanding operations.
Tariffs are not worker-friendly. They are damaging taxes that are headwinds to realizing our full economic potential as we emerge from the pitfalls of the past year. To truly achieve worker-centric trade policies, the Biden administration needs to end the trade war and provide businesses with the tariff reprieve they’ve been asking for over the past three years.
• Lynn Holmes is the former Chairman of the North Carolina Employment Security Commission.