Since the current president, very much along with the former one, is clearly so enamored of placing the very heavy boot of the federal government into the marketplace, in what seems a grand homage to the way that the Chinese government runs its economy, why not just go all in?
Why stop with imposing crippling tariffs on foreign goods just to show you can, in order to make a domestic political point and as a Bronx cheer to your international rivals, even though it’s a hammer-blow to your citizens’ pocketbooks?
Why not just adopt Beijing’s Politburo-directed policy of, for instance, building vast ghost cities with entirely empty apartment towers for the temporary jobs the construction will create even though no one wants to live there?
Why not tell Americans how many babies they can have: Just the one! Oh, wait! No, have three, because now we’ve got way too many old folks and not nearly enough young workers to support them!
Sounds absurd, because it is.
But the trade war President Joe Biden is currently engaged in with China by upping even further the tariffs on some goods produced there is precisely in line with such dismal interventionist approaches to government policy.
After campaigning against them, Biden never removed the wrongheaded tariffs former President Donald Trump imposed on Chinese goods, and now the current president is going to up the ante.
It’s true that, unlike the capricious Trump, Biden has not imposed tariffs on random goods produced by allies, such as the one Trump hit French wine with for no other reason than to be classically mean to the French.
But this week Biden slapped major new tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, aluminum and medical equipment. On the auto front, the tax rate on imported Chinese EVs will rise to 102.5% this year, up from current levels of 27.5%. The tariff rate will double, up to 50%, on solar cell imports this year. Tariffs on certain Chinese steel and aluminum products will climb to 25% this year. Computer chip tariffs will double to 50% by 2025.
This is a good time to remind ourselves that tariffs aren’t a cost paid for by governments. They are paid for by consumers — in this case, by all Americans.
It is true that the EV tax at this point is mostly a symbolic one. When the Associated Press looked at what cars would be affected, it could only find two Chinese-made vehicles that would fall under the tariffs right now, the Polestar 2 luxury EV and potentially Volvo’s S90 luxury gas-electric hybrid midsize sedan.
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And it is also true that the Biden economic team is targeting the car tariffs not at those current models but at the reports that in the very new future China could be exporting EVs that would sell at the extraordinarily low price of $12,000, which would make them enormously attractive to American consumers.
Triply true: Such a low sticker price will only be possible thanks to huge Chinese government subsidies for the EV makers in order to create market share.
But such facts simply do not override the most profound rule of international trade: Trafficking in tariffs is always a mug’s game. Governments do it for one reason only, which is internal domestic politics. It’s very hard to explain the complexities of the fact that nations should produce what they do best and most efficiently, and trade with other nations for other goods, to the average voter. Biden is engaged in a close and gripping re-election campaign against Trump. He and his economic advisers know the reasons tariffs are bad. They simply think they can’t afford to be seen as non-China bashers during the silly season that is a presidential campaign.
