Impact of current/proposed/reduced US tariffs under Biden's Administration.

Biden Administration inherited tariffs imposed by former President Donald Trump’s Administration which many economists and analysts see as harming U.S. consumers and companies. The tariffs initiated by Trump Administration that remain in place under Biden Administration include tariffs on imported steel and aluminium, solar panels, washing machines and a variety of Chinese imports.

The International Monetary Fund (IMF) report issued on July 1, 2021, “Concluding Statement of the 2021 Article IV Mission,” took a swipe at the U.S. concerning these trade policies. The IMF advised the Biden Administration to remove these tariffs as they are a hindrance to free trade. 

These tariffs have seen the U.S. carrying the burden of tariff hikes, that is, they have had a negative impact not only on American workers and wage-earners but also on consumers. The tariffs imposed on these imports implied that some companies had to close shops due to high importation costs due to the interruption to the supply chain when there were no domestic substitute suppliers. As a result, workers were laid off. On the other hand, consumers of the products slapped by the tariffs also have to dig deeper into their pockets as the cost of production increases resulting in decreased consumption.

Stuart’s article notes that these tariffs that have remained in place for more than four years have been damaging more than originally thought. For instance, they have led to a decline in the well-being of U.S. consumers by 7.8% - they have caused a decline in U.S. stock prices, expected Total Factor Productivity, expected inflation largely by moving micro variables as well as a decline in returns of firms trading with China. The Trump administration tariffs cost the average U.S. family more than $1,200 a year as calculated by the Congressional Budget Office.

These tariffs however have been found to cushion the least efficient companies and reduce their incentives to innovate whilst hurting the most successful U.S. businesses and reducing their capacity to innovate.

Besides retaining most of the Trump Administration tariffs, March 4, 2021, and March 5, 2021, published a four-month delay of tariffs between the U.S. and the United Kingdom and the U.S. and the European Union respectively. The announced tariffs targeted aviation, food, beverage and travel goods. This was expected to ease costs incurred by consumers, farmers, ranchers and businesses that deal with such products.

Although Biden’s Administration has retained much of the Section 301 tariffs on Chinese goods imposed by the Trump Administration, it eased Personal Protective Equipment (PPE) tariffs. This means the availability of PPEs in the fight against COVID-19 – is a good move for businesses and public services opening in the pandemic era. It then means more people can return to work making the economy move again.

U.S. tariff hikes against other countries, for instance, China and European Union have also meant an effect on those countries. These include:

• Chinese export goods slapped by tariff hikes dipped compared to unaffected products.
• US tariffs on Chinese goods caused the U.S. trade deficit with Mexico, Europe, Japan, Taiwan and South Korea to increase as a result.

References

1. Amiti, M., S. J. Redding, and D. Weinstein (2019). The Impact of the 2018 Tariffs on Prices and Welfare. Journal of Economic Perspectives 33 (4), 187–210.

2.  Bellora, C. and L. Fontagne (2019). Shooting oneself in the Foot? Trade War and Global Value Chains. Mimeo Paris School of Economics.

3. Nasim D. Fusel (March 9, 2021). Biden Administration Announces Tariff Trifecta. Holland & Knight Alert retrieved from https://www.hklaw.com/en/insights/publications/2021/03/biden-administration-announces-tariff-trifecta

4. Stuart Anderson (July 7,2021). IMF Tells Biden To Dump Trump’s Tariffs. Forbes. retrieved from https://www.forbes.com/sites/stuartanderson/2021/07/07/imf-tells-biden-to-dump-trumps-tariffs/?sh=77e8cbd242b3