The Evolution of China Tariffs: Trump vs. Biden

The economic landscape between the US and China has been deeply influenced by a series of tariffs introduced by the Trump administration and carried over, with some tweaks, by the Biden administration. Here’s a breakdown of how these tariffs have developed and their impact on the economy.

Trump’s First-Term Tariff Blitz

During his first presidential term, former President Donald Trump pursued an aggressive strategy against China. This strategy began in March 2018 with tariffs imposed on up to $60 billion worth of Chinese imports. Over the next year, tariffs escalated in rounds, culminating in an impactful 25% tariff on $200 billion of Chinese goods by May 2019.

• Trade affected: Over $380 billion in US-China trade became subject to tariffs.
• Total tax burden: Nearly $80 billion in tariff taxes were imposed due to these policies.

While the tariffs were designed to counter alleged unfair trade practices by China, they had lasting consequences for global supply chains and the US economy.

How Biden Handled the Tariff Legacy

When President Joe Biden took office, most economists anticipated a potential rollback of the Trump-era tariffs. Instead, the Biden administration opted to maintain many measures while implementing key adjustments:

• Some tariffs on European Union imports were suspended.
• Others were replaced with tariff-rate quotas, a blend of tariffs and quantity limits.
• New tariffs worth an additional $18 billion on Chinese goods, including semiconductors and electric vehicles, were announced in May 2024.
• This action added $3.6 billion in new taxes to US-China trade.

The Biden administration’s choices show a desire to maintain leverage on Beijing while also reinforcing domestic manufacturing initiatives.

Economic Ripple Effect

While tariffs may seem like a tool to protect domestic industries, they have had sizable economic costs. Studies have quantified the negative impact of these measures:

• GDP hit: A projected 0.2% reduction in long-term US GDP.
• Employment decline: The equivalent of 142,000 fewer full-time jobs.
• Reduced corporate investment: Tariffs were linked to a 0.1% drop in the US capital stock.

The additional costs of tariffs have also filtered down to consumers, with businesses passing on higher expenses through increased prices.

Trump’s Second-Term Approach

As President Trump assumes office for his second term, his administration has taken a measured approach—surprising many who anticipated an immediate escalation in China-specific tariffs. Instead, the plan involves conducting a comprehensive study and potentially engaging with Beijing rather than reigniting the trade war.

This strategic pivot might aim to address economic challenges caused by the original tariffs while paving the way for constructive dialogue.