Biden is playing with Trump's deck of cards on trade. But tariffs aren't a solution to everything.
President Joe Biden this week announced new tariffs on a suite of Chinese goods, the result of a yearslong investigation into what, if any, changes should be made to his predecessor's punitive tariffs on China. Essentially, the finding left all of Trump's tariffs in place and then added to them. But what's the endgame here? The obvious answer is: fighting back against China. With Washington coalescing around the idea of Cold War-esque competition with Beijing, issuing tough trade penalties feels good. But we should judge this acute shift in trade policy by the actual goals we're trying to achieve, and that means defining the problem in more specific terms. Is it that the U.S. needs more manufacturing jobs? Is it that the U.S. should make things in certain strategic sectors? Is it that China needs to change its behavior? Is it that we don't want to rely on China specifically for certain goods? These are not mutually exclusive, but they are distinct issues, some of which tariffs are better suited to addressing than others. The Biden administration's announcement this week seems particularly focused on boosting American manufacturing in specific sectors, especially when coupled with green energy subsidies in the large investment package passed by Democrats in 2022. This seems reasonably likely to succeed, as this is how industrial policy has historically been used around the world. But Biden is also selling this policy as an effort to promote jobs. It may boost employment in those sectors, but it's not at all guaranteed that it would increase manufacturing employment overall – people could simply shift from one set of manufacturing jobs in one sector to another favored by Biden, like making electric vehicles. Even after Trump's broad-based tariffs on Chinese goods, jobs in the manufacturing sector stayed basically steady. And manufacturing output also isn't the same as manufacturing jobs. The sector as a share of the U.S. economy hasn't really declined…
Victoria Guida Is An Economics Reporter Covering The Federal Reserve, The Treasury Department, The Forces Driving Economic Policy. Her Column, Capital Letter, Demystifies The Policies, People, Institutions That Shape The Financial System, The Broader Economy.