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Tariff stunt undermines US economic security rather than enhancing it

Xinhua | Updated: 2024-05-19 07:16
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A traveler wearing a mask is seen at Ronald Reagan Washington National Airport in Arlington, Virginia, the United States, April 14, 2022. [Photo/Xinhua]

BEIJING -- With a claimed purpose of enhancing America's economic future and national security, Washington has launched a fresh round of tariff war against Chinese products, which industry insiders and experts say will actually cripple US economic resilience and could even put American lives at risk.

Once on shore, pray no more

Of more than a dozen categories of newly-targeted Chinese goods with an aggregate value of $18 billion, medical supplies once badly needed in the US battle against COVID-19 stand out, as they face unreasonably high tariff adjustments this year despite a significant decline in their sales to the world's largest economy.

"This round of US tariff hikes was retaliatory and doesn't make sense," Wang Jie, head of a leading medical supplies manufacturer in Central China's Hubei province, told Xinhua.

China has been the largest supplier of epidemic prevention products to the United States. From January to October 2020, the latter imported $11.1 billion of epidemic prevention materials from China, accounting for 67 percent of its total imports of such goods.

Among them, face mask imports from China hit $6.3 billion, accounting for 85 percent of its total imports of face masks, according to the Office of Textiles and Apparel of the US Department of Commerce.

If the new additional tariff rate, a jump from 0-7.5 percent to 25 percent for face masks, was imposed at that time, Americans had to foot an extra bill of at least $1.1 billion on their personal protective equipment expenditure.

In April 2020, at the peak of the global battle against COVID-19, the US government banned exports of respirators, masks and gloves, all deemed as "scarce and threatened materials." Export detainments at airports and customs were frequently reported, drawing outcries from other countries.

Wang recalled her company, specialized in producing personal protective equipment, including masks, protective suits, and medical caps, had worked overtime to meet surging demand of masks for the United States during COVID-19.

Dangerous tariff stunt

To the affected Chinese mask manufacturers, the tariff move has shown a willful America dropping its benefactors as soon as their help is not required.

"Some US politicians and businesses believe China profited significantly from mask sales during the pandemic, turning a blind eye to the increased costs due to emergency response measures during that time," Wang explained.

As the pandemic has gradually waned since 2021, the company saw a sharp decline in overseas orders. Currently, masks account for less than 10 percent of the company's exports to the United States.

"The impact of higher tariff rates on our goods is minimal," Wang said. "Ultimately, the raised tariffs will not be paid by China, but by US importers and consumers."

Observers said that the US move had been driven by politicians' fear of the country's excess dependence on the Chinese industry, as US-based medical mask and glove makers have largely flamed out after surging during COVID-19.

It was reported that the Federal Government had funneled $1.2 billion to help boost domestic production of key medical supplies like masks and gloves. But domestic customers willing to pay the price of made-in-the-US alternatives have been hard to find.

US mask makers have been lobbying for federal support to tackle with the huge inventories they can't sell. The Biden Administration claimed its actions are "carefully targeted at strategic sectors" and will "protect American workers and businesses."

Ironically, some major US clients of Wang's company have already protested to the US government, as using tariff barriers to shore up domestic manufacturing has proven to be an unwise move.

It is more of a political stunt failing to address any real challenge smothering the industrial growth on US turf. Serious considerations are needed to clear deep-rooted obstacles, from the persistent demand deficiency, high costs, modest profits to the absence of long-term plans on coping with the need of strategic stockpiles for public health emergencies.

Putting up tariff barriers and scapegoating China will do no good to the United States, as such moves could translate into a self-inflicted cutoff of Chinese supplies in any future crisis, observers said.

If mutual trust in trade and economic cooperation is damaged, how can Washington expect China to give a helping hand again in case of an epidemic resurgence, they questioned.

Setback in green transition

Another hole in the US tariff politics relates to its unwise stance concerning the EV sector which is dampening its green transition.

Bill Russo, founder & CEO of Automobility Limited, a Shanghai-based strategy and investment advisory firm, said tariff walls do nothing to improve the competitiveness of US domestic carmakers. Worse, it creates a security blanket and extends the life of their gas powered vehicles.

As a result, US domestically produced goods may struggle to compete in international markets, ultimately jeopardizing the longevity of these businesses in a fiercely competitive landscape, Russo added.

"Despite all these losses, the US continues to expand the policies that created them," Josef Gregory Mahoney, a professor from East China Normal University, told Xinhua.

Their objective is to increase economic pressure on China to induce popular discontent, frustrate China's structural reforms, push China into a middle income trap, and derail China's increasingly vanguard positions in tech and green innovation, said Mahoney.

He doesn't think the US tariff policy will help the country develop new manufacturing capacities, because "what helped China's EV industry was making it internationally open and competitive."

The reality is that the new tariffs are the latest in a succession of anti-trade initiatives, which, taken together, are pushing the United States even further to the outside of norms of free-trade-based protocols, said Ker Gibbs, who led AmCham Shanghai during three US administrations and who is now executive-in-residence at the University of San Francisco.

Protectionist practices can threaten the common interests of humanity, said Qu Fengjie, a researcher with the Academy of Macroeconomic Research under China's National Development and Reform Commission.

The right solution would be to strengthen cooperation and technological exchanges with China's new energy industry and develop together amid competition and exchanges, Qu said.

In response to the new tariffs imposed by the United States, Wang Jie said her company has been considering how to enhance competitiveness and indispensability, including increasing investment in research and development.

"We're not passively reacting to changes in the international business environment caused by political shifts; instead, we're actively diversifying our options. Even if US buyers choose not to cooperate with us in the future, we're prepared with alternative plans," she said.

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