Biden Escalates The Economic War With China

President Joe Biden has taken the dispute with China to new levels – far beyond anything done by or even proposed by his predecessor, Donald Trump. Before Trump, presidents tended to categorized America’s relationship with China as a kind of partnership. There were complaints about some Chinese practices but no action. Trump changed that. Characterizing China as an economic competitor, he imposed heavy tariffs on Chinese goods coming into this country. Biden has not only kept those tariffs in place, but he has also imposed export controls and visa limits as well as restrictions on investment flows. The recently passed CHIPS for America Act adds subsidies for domestic production of semiconductors into the mix.

When in 2018 Trump started to impose tariffs on Chinese goods, the commentariat and many academics were highly critical. Some argued that the levies would hurt the American economy more than they would China’s. That claim was always dubious, since sales in America are much more important to China than sales in China are to America. Others worried, as it turned out unnecessarily, that the tariffs would invite a crippling retaliation not only from China but from other nations as well. More telling in the environment of 2018 were the complaints that tariffs ran counter to the free trade and globalization on which elite opinion seemed to believe political liberalization and world economic prosperity rested.

Trump defended his actions, albeit inarticulately. He claimed that he had no desire to stop world trade but rather was using tariffs to pressure Beijing to abandon its unfair trade policies, such as the use of domestic subsidies and the theft of patents, as well as its insistence that foreigners doing business in China transfer technology and trade secrets to a Chinese partner. That White House’s explanation did little to stop the criticism, while the tariffs did little to change Chinese policies.

Now, less than four years later, and without a word of criticism, the Biden administration has gone a lot further. This White House has kept all the Trump tariffs in place and for the same reasons as the Trump White House explained them. U.S. Trade Representative (USTR) Katherine Tai has stated repeatedly that they offer “a significant piece of leverage” to get Beijing to change its unfair trade practices. On top of this, the present administration has with the recently passed CHIPS for America Act introduced export controls and subsidies of the sort China uses to support its domestic industrial development, in this case to support the domestic American production of semiconductors. Other acts working their way through Congress and clearly supported by this White House would impose limits on American investment in China.

The latest action uses the CHIPS for America Act to enlist the Bureau of Industry and Security (BIS) to limit China’s access to advanced semiconductors, chip making equipment, and supercomputer components. Already in response, the important semiconductor tool manufacturer, ASML, has told its American employees to stop servicing Chinese customers, though typical of Washington, TSMC, Samsung, and SK Hynix have obtained exceptions that allow them to continue shipping similar equipment to China.

It is interesting that while Biden keeps upping the ante with China, he has received none of the criticism that the commentariat and the academic community heaped on Trump. Partisan politics might explain the difference. Much of the commentariat and the academic community identify with the party presently in power and what is more showed a personal and intense animosity toward Trump. But if partisan feelings can explain some of this difference, more likely and more interesting is how this lack of criticism captures a steep decline in elite support for globalization and free trade. It is a remarkable turn and seemingly a complete one in just 3-4 years.