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NEW YORK – Never before in the political history of the United States has the entire American business community – more than thirty major business organizations – spoken with one voice, as it did during ” an August 5 call for the Biden administration to eliminate tariffs on imports from China.
No entity in American politics is more timid than the corporate lobbies, much of the job of which is to quietly lobby for administrative relief and legislative adjustments. Such a high-profile intervention suggests that professional organizations believe a deal is already underway.
A deal is likely because inflation could poison the Democratic Party’s chances in the 2022 midterm election and return control of the US Congress to Republicans. Lowering tariffs is the fastest way to reduce inflation. Beyond the arithmetic of electoral politics, there is a consensus that the tech sanctions Trump imposed on China have failed and may even backfire.
More than 30 business groups, including the Chamber of Commerce, the Business Roundtable, the Semiconductor Industry Association, as well as representatives from retailers, farmers and manufacturers have called on Biden to cut tariffs and resume trade negotiations with China.
The letter said, “A worker-centered trade agenda should take into account the costs that US and Chinese tariffs impose on Americans here and at home and remove tariffs that harm US interests.” “
Last month, Treasury Secretary Janet Yellen told the New York Times that the tariffs “hurt American consumers.” Since then President Donald Trump imposed a 20% tariff on about half of the goods America buys from China, the Treasury has collected about $ 100 billion in fees. Most of that was paid for by American consumers.
Tariffs partly explain the explosion in durable goods inflation over the past year. Consumer prices for durable goods fell steadily between 1995 and 2020, mainly due to falling electronics costs. The consumer price index for durable goods fell 25% between 1997 and 2020, before rebounding 15% since the containment of Covid-19.
As the chart below shows, the decline in the prices of US imports from China had a significant impact on the prices Americans paid for durable goods.
Inflation is the most pressing economic problem for U.S. voters, according to a Vox / Data for Progress poll released on August 3.
The United States now imports about $ 550 billion a year from China, or nearly a quarter of US manufacturing output of $ 2.4 trillion on a GDP basis. Tariffs of 20% apply to about half of Chinese imports, so by simple arithmetic, eliminating tariffs should reduce the cost of durable goods in the United States by just over 2%.
Renmin University professor Jin Canrong, a prominent Chinese scholar closely followed in Washington, argued last week that inflation could bankrupt the US federal government by raising the cost of interest on the federal debt. (“Will China bail out Biden?” August 3, 2021).
The Chinese state-controlled English-language newspaper Global Times commented on August 6, “The high tariffs policy of the United States goes against the trend of the time and will not hold up for long. Chinese companies have generally adapted to the new situation, while the United States suffers more from tariffs than China. It gradually became a consensus in American public opinion. And this has given China better conditions to maintain its strategic direction. In fact, it is also an increasingly clear manifestation of China’s global power.
Meanwhile, a growing number of US strategists have concluded that Trump had failed to slow China down by cutting off access to high-end semiconductors made with US technology. Asia Times was the first to report last month that China has the semiconductor ability to bypass US sanctions for critical applications such as building 5G networks, and that China is moving fast to harness 5G. in a wide range of industries (“China is the first to step out of the Industry 4.0 gate”, June 26, 2021).
China will build nearly one million 5G base stations this year, far surpassing the rest of the world combined. Additionally, Chinese industry sources report that tens of thousands of dedicated 5G networks for factories, ports, warehouses, mines and urban transportation systems will be installed over the next year.
In a July 2021 report on China’s semiconductor industry, the US Semiconductor Industry Association wrote:
Last month, China sent astronauts into space to board a new space station. Earlier this year, China landed a rover on Mars. Chinese state media reported that inside the Chinese space station and Martian rover were 100% locally designed and produced semiconductors, signaling China’s increasingly sophisticated microchip capabilities. .
However, while China has mastered some chip technologies, its commercial semiconductor industry is still relatively nascent. Yet the Chinese government is making serious efforts to close the gap, investing well over $ 150 billion from 2014 to 2030 in semiconductors. Driven by a booming market and these government investments, China is poised to be increasingly competitive in certain semiconductor market segments.
In an Aug. 4 comment for Project Syndicate, Harvard professor Graham Allison and former Google CEO Eric Schmidt warned:
Most Americans assume that their country’s lead in advanced technology is unassailable. And many in the US national security community insist that China can never be more than a “close competitor” to AI. In fact, China is already a full-spectrum competitor in terms of business AI applications and national security. China isn’t just trying to harness AI; it’s mastering AI.
The pandemic has offered a telltale early test of each country’s ability to mobilize AI on a large scale in response to a national security threat. In the United States, President Donald Trump’s administration claims to have deployed cutting-edge technology as part of its declared “war” on the coronavirus. But, for the most part, AI-related technologies have mostly been used as buzzwords.
This is not the case in China. To stop the spread of the virus, China has locked up the entire population of Hubei province – 60 million people. That’s more than the number of residents in every state on the east coast of the United States, from Florida to Maine. China has maintained this massive cordon sanitaire by using AI-enhanced algorithms to track the movements of residents and ramp up testing capabilities during the construction of massive new health facilities.
Asia Times unveiled the story of China’s use of AI for pandemic control on March 3, 2020 (“China removed Covid-19 with AI and big data”).
Trump’s tech sanctions haven’t slowed China down. On the contrary, as Allison and Schmidt claim, China is winning over the United States and overtaking it in some areas. For both economic and strategic reasons, the Biden administration is likely to give Trump’s failed Chinese policy a decent burial and move on.
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