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Wednesday, May 22, 2024

Biden Was Right on the Economic Harm of Tariffs—in 2019

Biden's new tariffs on the imports from China will be paid by Americans.

Image Credit: Public Domain (via Raw Pixel)

Democratic presidential challenger Joe Biden ripped then-President Donald Trump in 2019 for his trade policies with China, which Biden said were hurting farmers and small-business owners.

In particular, Biden singled out Trump’s tariffs on goods produced in China, which had provoked retaliatory trade regulations from Beijing.

“President Trump may think he’s being tough on China. All that he’s delivered as a consequence of that is American farmers, manufacturers, and consumers losing and paying more,” Biden said, speaking at the Graduate Center at the City University of New York. “His economic decision-making is so shortsighted and as shortsighted as the rest of his foreign policy.”

Biden wasn’t wrong. Trump’s tariffs were harmful.

A Federal Reserve paper found that in 2018 alone, Trump’s tariffs landed on some $283 billion of imports, making those goods more expensive for U.S. buyers. China responded by slapping tariffs on some $121 billion worth of U.S. exports. The end result was that the federal government and China collected billions in new revenues and the tariffs cost Americans about $19 billion.

This outcome was not unexpected. The University of Chicago Booth School of Business polled dozens of economists and asked whether Trump’s tariffs on steel and aluminum would “improve Americans’ welfare.” Not a single one answered yes.

Fast-forward five years, however, and Biden isn’t just embracing Trump’s trade policies. He’s putting them into overdrive.

The White House on Tuesday rolled out a bevy of new tariffs on Chinese products, ranging from medical devices to semiconductors and electric vehicles, which will see duties nearly quadruple from 27.5% to 102.5%.

The tariffs, which are expected to affect some $18 billion worth of imports, were criticized by Beijing, which promised to respond with “all necessary actions.”

So how did Biden end up embracing the very same lousy policies he was criticizing just a few years ago? The answer is simple: politics.

“New tariffs on imported EVs and other products from China are driven mostly by domestic political calculations in the run ​up to the 2024 presidential election,” noted Clark Packard, a research fellow at the Herbert A. Stiefel Center for Trade Policy Studies.

The calculus seems to be that being seen as “tough on China” could help Biden, who is struggling in recent polls, gin up votes in the Rust Belt, which holds several key swing states.

Unfortunately, the tariffs will land hardest on consumers, business owners, and workers — even if they never know it.

“The harm which a tariff does is invisible,” the economist Milton Friedman pointed out. “It’s spread widely. There are people that don’t have jobs because of tariffs, but they don’t know it.”

Biden isn’t just flip-flopping on free trade. He’s also undermining his own climate agenda.

The president has claimed he believes climate change is the greatest danger facing humanity, even worse than the threat of nuclear war. It’s such a serious matter that he’s ordered the federal government to phase out the production of gas-powered cars, mandating that a majority of passenger vehicles sold in the United States be hybrids or electric vehicles by 2032.

It should go without saying that slapping tariffs on the millions of affordable electric vehicles China produces each year is hardly an effective way to get Americans to “kick their fossil fuel habit.”

If Biden genuinely believed that transitioning to electric vehicles was imperative to human survival, he could simply lift these tariffs and allow Americans to purchase electric vehicles from China versus ordering the entire U.S. auto industry to start making more electric vehicles — or else.

There are generally two arguments against such an approach. The first is that China’s electric vehicles are inferior products that no one would want. That’s possible, but if true, the tariffs are hardly necessary in the first place.

The second argument is that we have no choice but to slap tariffs on China’s electric vehicles because if we don’t, China will “flood” the U.S. market with affordable, efficient, subsidized vehicles — as if this were some kind of threat.

It wasn’t supposed to be this way.

Biden, unlike Trump and Sen. Bernie Sanders (I-VT), was a longtime proponent of free trade. He supported NAFTA and voted to reduce trade barriers two dozen times as a senator.

People would do well to stop heeding Trump and Biden on trade. They’d be better served to consider the wisdom of a great American who understood the benefits of trade.

“No nation was ever ruined by trade,” Benjamin Franklin wrote in a pamphlet in 1774, “even seemingly the most disadvantageous.”

This article first appeared in The Washington Examiner.

  • Jonathan Miltimore is the Senior Creative Strategist of at the Foundation for Economic Education.