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American trade experts predict that the US approach of imposing tariffs on China will have opposite results, as reported by the New York Times today. Regardless of the outcome of the upcoming presidential elections and control of the US Congress this fall, it is likely that the strict trade policy will continue.
Critics of tariffs and export restrictions on China argue that this policy will not only exacerbate inflation and economic growth but is also likely to fail. They point out that Chinese companies may experience a slowdown in their operations due to the restrictions but have found ways to overcome them.
The American newspaper highlighted Huawei as an example of how companies can find alternative solutions. Last year, the Chinese telecommunications giant unveiled the Mate 60 smartphone, powered by advanced semiconductor technology that surprised Washington. The chip used in the phone was specifically the type of technology the Biden administration was trying to keep out of China's hands.
Assistant Professor at the University of Copenhagen, Douglas Fuller, stated that Huawei's achievement was not a violation of international trade rules but rather a result of the company using a network of gray channels to obtain banned materials needed for chip manufacturing. He noted that vague US controls on these suppliers actually helped Huawei.
A similar approach could succeed with electric vehicles, which are a key focus of increased tariffs on Chinese goods. According to the New York Times, tariffs on electric vehicles have jumped from 25% to 100%, leading analysts to expect increased production of Chinese electric car companies in Mexico to bypass import taxes imposed by President Joe Biden.
The report by the New York Times mentioned that advocates of free markets argue that trade barriers bring other problems. Protectionist trade policies tend to stifle competition, limit consumer choices, raise prices, and are expected to weigh on economic growth and the job market, according to calculations by the American Tax Research Foundation.
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