President Trump reached a “Phase One” deal with Chinese Vice Premier Liu He on Friday in their 13th round of trade talks, with the president agreeing to delay a tariff increase that was due this week.
The delay on $250 billion worth of Chinese goods is welcome news for American businesses and consumers. But it also means that U.S. businesses will continue to struggle under the burden of current tariffs and uncertainty in supply chains.
American businesses thrive when they can dedicate their time and resources to innovating and competing globally, not to checking Twitter for trade policy updates and combing through HTS codes to figure out which products are facing higher taxes.
The goal for each round of negotiations has been the same: for the U.S., to codify stronger intellectual property protections and also increase agriculture purchases; and for China, to roll back tariffs and blacklists imposed on its companies. And while the Phase One deal addresses short-term issues, such as getting China to buy more agriculture products, agreements around financial markets and, of course, delaying the tariff increase on Chinese imports, it doesn’t substantively address the long-term issues associated with intellectual-property theft and forced technology transfer.
Also, this is a verbal deal — there is no “official” agreement text yet.
The shouts of disapproval from American business-owners who have been paying the U.S.-mandated tariffs for the past 18 months are growing louder. Farmers who were not covered by the promises on agriculture or fully paid the federal bailouts are impatient. Republican leaders are admitting the administration’s tariffs-as-a-weapon strategy is not working. And more voters are viewing the tariffs negatively — all while the 2020 election inches closer. Meanwhile, trade-related stock market swings cause concern for average Americans who carefully watch the value of their 401(k)s and IRAs.
President Trump is right to fault China for unfair practices. China has stolen American intellectual property and imposed ambiguous requirements such as mandatory partnerships and forced tech transfers on our companies. But reaching a “deal” while continuing to impose tariffs is a one step forward, two steps backward approach. There are better tools the president can use to counter China’s bad behavior.
To start, the U.S. should reenter the Trans-Pacific Partnership — a 12-nation bloc (now 11) created to compete with China — that President Trump pulled the U.S. out of as soon as he took office. The president can also ensure the World Trade Organization (WTO) remains viable. By failing to allow WTO to have judges, the Trump administration is choking the WTO from acting and, ironically, this international dispute resolution group mostly favors the U.S. in disputes and could have handled every complaint the U.S. has about China. The president’s blockage of new judges, halting any future cases at the WTO, is stifling the organization’s ability to effectively handle trade conflicts.
Important new trade agreements are being forged all around us — we just aren’t a part of them. Twelve pacts have been signed among other countries just over the last two years. Japan has ratified its own agreement with Europe, and Europe has cultivated agreements with other countries across the globe. As a result, American-made products cost significantly more in a number of countries than competitive products from around the world — our incoherent trade policy has put American companies, farmers and manufacturers at a distinct disadvantage.
Tariffs are taxes that are pushing our farmers into bankruptcy, hurting our tech companies and fueling global market uncertainty. Our Constitution gives Congress the exclusive power to tax. Congress delegated to the president the right to impose tariffs for national security, as he has done with steel and aluminum, but only after an investigation and finding of unfairness. Neither of these situations applies to the retaliatory tariffs on over $327 billion worth of Chinese imports, on which the administration has levied tariffs — with another $173 billion in products under tariffs starting Dec. 15. The president is overstepping his power at the crippling expense of American businesses, workers and families.
Trump said this week’s deal is the first phase of a broader agreement. Indeed, there’s no “official” deal text yet. But if the U.S. and China don’t reach a substantive agreement at the November summit in Chile as he has indicated, Congress must act. The best first step is to call a hearing to review the scope and intent of the president’s misguided trade policy. A second step would be passage of the Reclaiming Congressional Trade Authority Act of 2019, which reasserts Congress’ role in trade policy and limits the president’s ability to impose tariffs. This bill will protect Americans — families and businesses alike — from being crushed by continuously increasing tariffs.
As every economist knows except for the one now working in the White House, no one wins a trade war. Indeed, thousands of economists urged Congress in 1930 not to pass the Smoot-Hawley Tariff Act. Congress ignored the plea, and it spiraled the U.S. — and the world — into the Great Depression. Unfortunately, that one economist in the White House today — Peter Navarro, assistant to the president — continues to reiterate his misunderstanding that “consumers don’t have to worry.”
But time is up! American consumers and businesses are more worried than ever about the damage tariffs are inflicting on our country. And next year’s national elections are an excellent opportunity to voice their economic concerns. Voters won’t stand by idly as costs continue to rise and the telltale signs of an economic slowdown pile up.
Gary Shapiro is president and CEO of the Consumer Technology Association. He is the author of the new book, Ninja Future: Secrets to Success in the New World of Innovation.
