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The “China tariffs” are under review. The U.S. trade representative (USTR) is looking into whether President Trump’s Section 301 tariffs, which remain in place under President Biden, are “effective” or not. No need to wait for the study. The answer has long been clear: No.
By every measure, the tariffs have done serious harm to the U.S. economy. The full price of the tariffs has been paid by American wholesalers, retailers and consumers. Trump touted the idea that the tariffs would have a “zero pass-through:” U.S. prices would rise, Chinese prices would fall, but neither by the full amount of the tariffs. This didn’t happen. Why?
The evidence suggests that China diverted its exports to third markets, and thus didn’t have to change its prices. In fact, China’s exports to the world did not decline, and commanded the same price after the tariffs as they did before.
U.S. retail prices on affected goods didn’t change either. American wholesalers and retailers ate the full cost of the tariffs. U.S. export competitiveness also took a beating, given the higher costs of imported inputs.
