The Biden administration has signaled a toughening economic stance toward China, bolstering its military alliance with Japan while delivering pointed warnings to Beijing. These moves, while potentially useful for Biden’s political campaign, raise concerns about the future of the strained superpower relationship.
Joint Statements with Japan: A Coordinated Response
Meeting with Japanese Prime Minister Fumio Kishida, President Joe Biden emphasized the importance of close cooperation in responding to China-related challenges. Kishida echoed these sentiments, declaring that Japan and the U.S. would coordinate their actions to address any concerns raised by Beijing.
Economic Red Lines and Overcapacity Concerns
Treasury Secretary Janet Yellen raised economic red lines during her visit to China, expressing concerns over Beijing’s alleged overcapacity of affordable clean energy items like solar panels and electric vehicles. She warned of potential tariff increases if China failed to address these concerns, citing fears of global market disruption.
China dismissed these allegations as “groundless” and accused the U.S. of protectionist policies aimed at stifling competition. However, Yellen emphasized the importance of stabilizing the relationship between the two countries after years of communication issues sparked by the previous tariff war.
Political Motivations: Biden and Trump’s China Stance
Analysts believe Biden’s tariff threats may be more politically motivated than economically substantive. By targeting China, Biden echoes similar sentiments expressed by former President Donald Trump, both aiming to appeal to American voters. Trump previously suggested a 60% tariff on all Chinese imports and a 10% tariff on all imports.
The Challenges of Tariffs
Economists argue that tariffs, while politically appealing, have their pitfalls. They can punish American importers and consumers more than intended targets and fail to resolve underlying structural issues. According to a study by the U.S. International Trade Commission, U.S. importers largely absorbed the costs of tariffs imposed by the Trump administration.
Furthermore, Chinese exporters can exploit loopholes to bypass tariffs, such as tariff exemptions or manufacturing rerouting to other countries. Additionally, tariffs can have short-term negative economic consequences, including reduced GDP, increased consumer prices, and rising inflation, as noted by Goldman Sachs.
Uncertain Future: Risks and Rewards
The administration’s moves could play to Biden’s political advantage, but they also risk freezing bilateral relations between the U.S. and China. The long-term impact of this tougher stance remains uncertain, leaving the future of the relationship hanging in the balance.
