“ Raise tariffs on a wide swath of China’s exports and implement policies to rebuild domestic American manufacturing. ”
Americans have heard plenty about China’s spy balloon. Washington considers this a serious breach of U.S. sovereignty and lawmakers are contemplating a response. However, Beijing has so antagonized the United States that Congress and the Biden administration must move boldly. It’s time to finally start the long-overdue process of decoupling America’s economy from China.
On simple humanitarian grounds, the U.S. is already late to the party. Beijing’s human rights abuses and slave labor in Xinjiang are well-documented. The continuing environmental toll of China’s polluting factories — including ozone-destroying chemicals — should be enough to send sensible nations running. But economics matter, too. Decoupling from China now could launch an American industrial renaissance — and also create millions of good-paying U.S. jobs.
For starters, it should be a no-brainer to repeal China’s “Most Favored Nation” (MFN) status. After 20 years, it’s clear that trade liberalization has failed to transform China into an ally, a partner, or even a more democratic society. In fact, the opposite has happened.
MFN has allowed two-thirds of China’s exports to face little or no tariffs in the U.S. In fact, America’s top three imports from China—laptops, cell phones, and children’s toys—face no tariffs whatsoever. And only one-third of China’s exports are even covered under the “Trump tariffs” imposed in 2018.
With Beijing already massively subsidizing its state-owned companies, it makes no sense to allow such continued, duty-free access. This is especially egregious when considering that much of China’s manufacturing comes without any real semblance of labor or environmental controls.
The answer is twofold: Raise tariffs on a wide swath of China’s exports and implement policies to rebuild domestic American manufacturing.
Washington must also address Beijing’s exploitation of America’s financial markets. China continues to use America’s stock markets as a means to raise funds for its state-owned companies. And despite passage of the Holding Foreign Companies Accountable Act (HFCAA) — which was expected to ensure that Chinese companies would comply with U.S. audit laws — Beijing is still bypassing accountability and fleecing unsuspecting U.S. investors.
The U.S.-China Economic and Security Review Commission (USCC) has identified 261 Chinese companies — including eight state-owned enterprises—listed on America’s three largest stock exchanges, with a combined market capitalization of $1.4 trillion. Additionally, thousands of other Chinese companies tied to forced labor and Beijing’s military are included in passive investment products including exchange-traded funds and mutual funds. It’s time to boot them from America’s financial arena.
Even with higher tariffs, China will continue to flood the U.S. market with artificially underpriced goods. That’s because Chinese companies benefit from the inexplicably high threshold level imposed by U.S. Customs on imports of small consumer packages.
“ Amazon can mass-import any goods valued at less than $800 from China and face no tariffs, inspections, bonds, or taxes whatsoever. ”
This is the reality of the e-commerce economy — particularly Amazon.com’s AMZN, -2.42% cozy relationship with Beijing. China now accounts for roughly 40% of all Amazon sales. In 2016, the “de minimis” threshold applied to these goods was raised to a precedent-shattering $800. As a result, Amazon can mass-import any goods valued at less than $800 from China and face no tariffs, inspections, bonds, or taxes whatsoever.
The de minimis loophole has become a huge boon for both Amazon and China. It’s simply one more avenue that Beijing exploits in order to outcompete domestic U.S. manufacturers who actually adhere to workplace standards while paying America’s corporate taxes.
In response, Washington must take decisive action to reshore supply chains and start rebuilding domestic manufacturing. Just as the Inflation Reduction Act is now expanding America’s electric vehicle industry, other federal policies can also incentivize key industries, including pharmaceuticals, semiconductors, and rare earth metals.
Right now, the United States is beholden to China for everything from critical medicines to military hardware. It’s deeply troubling that our nation relies on an adversary for both life-saving medicines and national security.
The recent spy balloon should be the kicker that finally moves Washington onto an urgent footing. There’s no time to waste in beginning the process of decoupling the United States from its dependence on China.
Zach Mottl is Chair of the Coalition for a Prosperous America (CPA) and President of Atlas Tool Works.
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This article was originally published by Marketwatch.com. Read the original article here.