A Better Strategy on US-China Trade

le yucheng.webp

China's Vice Minister of Foreign Affairs Le Yucheng

San Francisco / September 22, 2021

Political scientists Jiakun Jack Zhang and Samantha A. Vortherms just published a working paper that studied the impact of Trump's tariffs on Chinese goods (link). The Trump Administration and many Republicans running for office today (ahem -- JD Vance) argue that imposing tariffs on Chinese goods will cause multinationals to shift supply chains from China to the US. This was a core plank of Trump's trade strategy.

 

Zhang and Vortherms found that tariffs from 2018 to 2019 did not have the intended effect. Multinationals did not remove supply chains from China. Instead, the tariffs imposed collateral damage especially on medium and small US businesses.

 

The Republican Party must drop the idea that tariffs are an effective way to create more supply chain jobs in the US. This does not work.

 

If the goal is to create more supply chain jobs in the US, the US government should approach senior executives of top tier technology firms and offer financial incentives to convince them to locate supply chains in the US. The Biden Administration is doing this in semiconductors. Biden is offering tax incentives and financial assistance to get Intel and TSMC to build factories with good paying jobs in the US.