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U.S. Treasury Secretary Janet Yellen speaks at a press conference in Venice, Italy, July 11, 2021, after attending a meeting of Group of 20 finance chiefs and central bank governors.
Donald Trump had a grand total of two (2) semi-competent policies. One was throwing a lot of money at vaccine makers. The other was taking a harder line with China. Both policies left a lot to be desired in their details, but they were directionally correct.
The core of Trump’s China policy was 25 percent tariffs on $250 billion worth of China’s exports. This was a blunt instrument, and its impact did not exactly track with China’s most abusive export subsidies, but the order of magnitude was about right.
Some trade experts referred to this as a “dirty 301.” Let me explain. Section 301 of the 1974 Trade Act allows the U.S. to retaliate against foreign subsidies and other trade practices that violate norms of free and fair trade. But the process is cumbersome, the WTO brands unilateral actions as unfair trade practices, and for the most part U.S. administrations haven’t used it much.
The tariffs are a rough proxy for the 301 process. Without them, the U.S. auto and steel industries would be in far worse shape, due to China’s predatory trade practices.
For now, Biden’s trade officials, led by U.S. Trade Representative Katherine Tai, have recommended leaving the tariffs in place as leverage for comprehensive bargaining with China down the road. But last week, Treasury Secretary Janet Yellen took a very different view.
In an interview with The New York Times, Yellen said that the tariffs “hurt American consumers,” adding that they “didn’t address in many ways the fundamental problems we have with China.”
Well no, of course they didn’t. But they are useful leverage in pursuit of addressing the fundamental problems, and in the meantime they function as a stand-in.
I mostly have a lot of regard for Yellen. Having her at Treasury sure beats having a Wall Street revolving-door hack. But this view of China policy is an alarming throwback to naïve globalism.
I hope Katherine Tai threw a fit and that someone at the White House clued in Yellen to what Biden’s China policy is. The administration cannot be coherent or credible, in Beijing or anywhere else, if its top people contradict each other.