Brainard Says Tariffs Needed to Avoid ‘China Shock’ in US

(Bloomberg) --

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President Joe Biden’s top economic adviser on Thursday offered a forceful defense of new tariffs on Chinese imports, calling them necessary to avoid economic turbulence from unfair trade practices that threaten to undo recent manufacturing and job gains.

“Investment must be paired with trade enforcement to make sure the comeback we are seeing in communities around the country is not undercut by a flood of unfairly under-priced exports from China,” National Economic Council Director Lael Brainard said at a Washington event hosted by the liberal Center for American Progress.

“We saw what happened when the first China shock harmed factory towns all over our country,” Brainard said, referring to a boom in Chinese exports earlier this century and lamenting what she called a “slowness” in the past to counter Beijing’s unfair trade practices.

“Today, at a time when a strong US recovery is underway powered by domestic consumption and investment, there are signs that China is exporting its way to recovery,” she continued. “China is using the same playbook it has before to power its growth at the expense of others by investing in significant industrial overcapacity and flooding global markets with artificially cheap exports.”

Brainard delivered her address two days after Biden accused China of cheating and dumping exports into US markets to fuel its own recovery and announced a sweeping set of tariffs on a range of goods he said was necessary to protect American businesses.

The measures this week, which marked the culmination of a lengthy review of so-called Section 301 tariffs imposed by Biden’s predecessor, Donald Trump, were announced as both men jockey to appear tough on China before a general-election rematch this November.

Biden did not reduce any of Trump’s tariffs, instead raising levies on semiconductors, batteries, solar cells, critical minerals, steel, aluminum and electric vehicles — products from industries the president has sought to support at home through his economic policies.

It’s a move intended to resonate with swing-state voters in an election in which Biden’s handling of the economy is a top concern and where he has struggled to sell his approach. Still, the policy poses risks. The US is bracing for potential retaliation from China, which has threatened to take “resolute measures.” Tariffs also threaten to raise prices for consumers already frustrated by persistent inflation.

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon cited the “restructuring of trade” as one factor that leads him to be more worried about inflation than markets appear to be in a Bloomberg Television interview Thursday. He noted significant geopolitical risks impacting inflation, including around “oil and gas prices, trade, alliances.”

The International Monetary Fund also criticized Biden’s decision to raise tariffs, saying tensions between the world’s two top economies risked hurting global trade and growth.

Brainard said the US is “already having conversations with other G-7 members” about its tariff moves and said some foreign partners have started or publicly considered similar trade actions to combat what they see as unfair Chinese trade practices.

Biden’s tariffs, which will take effect from 2024 to 2026, are more targeted than a 60% flat tariff rate Trump has been pitching. The biggest jump is for electric vehicles, with the rate quadrupling, while other imports are seeing levies doubled or imposed for the first time. In some cases, the levies apply to areas where China has only a small segment of the US market, but the goal is to head off a potential deluge of imports.

Trump has said Biden needs to expand tariffs to cover other products, including conventional cars. “China is eating our lunch right now and they went away from what I was doing,” Trump said Tuesday of the administration’s approach.

Brainard did not mention Trump by name but said Biden opposes plans to impose across-the-board tariffs on goods from other countries, which would cost the average American household as much as $1,500 more every year, citing an analysis from CAP.

She called Biden’s “targeted approach” a “sharp departure” from his predecessor.

“The previous administration did not take action to invest in America and failed to follow through on securing the promises that the Chinese made to make purchases,” Brainard said.

--With assistance from Jennifer A. Dlouhy, Francine Lacqua and Christopher Condon.

(Updates with delivered remarks and context throughout)

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