Yellen Says China Trade Deal ‘Harms American Consumers’

WASHINGTON — Treasury Secretary Janet L. Yellen has raised doubts about the merits of the U.S.-China trade deal and warned that tariffs will continue, arguing that she has not addressed the most pressing disputes between the world’s two largest economies. location hurt American consumers.

Ms. Yellen’s comments in an interview with The New York Times this week come seven months before the Biden administration’s comprehensive review of America’s economic relationship with China. The review should answer the fundamental question of what to do about the deal that former President Donald J. Trump signed in early 2020, which includes China’s commitments to purchase American products and reform trade practices.

The remaining tariffs on $360 billion of Chinese imports are hanging in the balance, and the Biden administration has said little about the fate of the deal. Trump administration officials have sought to create tariffs that will protect key American industries such as car making and aircraft manufacturing from what they describe as subsidized Chinese exports.

However, Ms. Yellen questioned whether the tariffs were well designed. “My personal view is that tariffs on China have not been applied very thoughtfully about where there are problems and what is in the interest of the United States,” he said at the end of his week-long trip to Europe.

President Biden did not take action to roll back the tariffs, but Ms Yellen suggested they were not helping the economy.

“Tariffs are taxes on consumers, in some cases it seems to me that what we did hurt American consumers, and the type of deal the previous administration negotiated didn’t address many aspects of the core issues we had with China,” he said.

However, given the rising tensions between the two countries on other issues, it may be difficult to reach any new agreement. Biden administration warns US businesses in Hong Kong On Friday, about the possibility of electronic surveillance and the risks of doing business there, including handing over customer data to the authorities.

Chinese authorities welcome any unilateral American move Removing tariffs according to two people involved in China policy. But China is not willing to withhold large industry subsidies in exchange for a tariff deal, they said.

China’s greatest leader, Xi Jinping, has called for the creation of millions of well-paid jobs for his country through technological self-reliance and state aid to Chinese manufacturers. electric cars, commercial aircraft, semiconductors and other products.

It may be possible to make some adjustments on the fringes of these policies, but speaking on condition of anonymity, both said China is not willing to give up on its ambitions because they are not authorized to discuss the issue publicly.

Academic experts in China share the government’s skepticism that any quick deal can be achieved.

“Even if we get back to the negotiating table, it will be difficult to reach an agreement,” said George Yu, a trade economist at Renmin University in Beijing.

The Trump administration has tried, without success, to persuade Chinese officials to drop heavy subsidies for high-tech industries. Mr. Trump’s trade representative, Robert E. Lighthizer, began imposing tariffs aimed at preventing subsidized Chinese companies from putting American companies out of business.

Making China Buy American Made

The United States and China called last year’s agreement the Phase 1 agreement and promised to negotiate a second phase. But that never happened.

Tariffs have played a particularly large role in the automobile industry.

In response to Mr Trump’s 25 percent tariff on gasoline and electric cars imported from China, American automakers like Ford have abandoned their plans to import cheap cars from Chinese factories. Chinese automakers such as Guangzhou Auto have also shelved their plans to enter the American market.

China’s auto exports soared this spring as new factories, many of which were built with extensive subsidies, went into production. But cheap Chinese cars mostly made their way elsewhere in Asia and Europe, even as car prices in the United States climbed.

Ms. Yellen did not specifically mention automotive tariffs.

Conditions first stage of trade deal included a requirement for a high-level review this summer. The deal requires China to stop forcing foreign firms to transfer their technology to Chinese companies that do business there.

Phase 1 also included China’s commitment to purchase an additional $200 billion in American goods and services by the end of this year. The purpose of the agreement was to discourage Chinese companies from purchasing American goods so that China does not retaliate against American tariffs.

Although China has resumed large-scale purchases of US goods since the countries’ trade war, neither the total value of those purchases nor the combination of purchases met the Trump administration’s hopes.

Chad P. Bown of the Peterson Institute for International Economics, which monitors the acquisitions, said China did not meet its commitments by 40 percent last year and has fallen more than 30 percent so far this year. The pace of agricultural purchases has increased, but China is not buying enough cars, planes, or other products made in the United States to meet its obligations.

China also pledged in the Phase 1 agreement that its purchases of American goods will continue to increase from 2022 to 2025.

Biden’s Mixed Approach

Biden’s management is meeting all these purchasing requirements. angry American allies those who think the deal costs them sales.

People familiar with China’s economic policies said one reason China was unwilling to restart potentially harsh negotiations on American tariffs and Chinese subsidies was that the Phase 1 agreement transformed trade relations between the two countries. Trade has gone from being one of the biggest sources of friction between them to one of the least contentious areas of their relationship.

Under Mr Biden, the United States continued to exert pressure on China and in some ways increased that pressure by focusing on concerns about Mr Trump’s humanitarian record that is often overlooked.

In March, the Biden administration imposed sanctions on top Chinese officials as part of a multinational effort to punish Beijing with Britain, Canada and the European Union. human rights violations largely against Muslims. Uyghur minority group.

In June, the White House took steps to eliminate forced labor in the country. supply chain for solar panels Including an import ban from a silicon manufacturer there in Xinjiang, China. It also set aside a dispute with Europe over aircraft subsidies to Boeing and Airbus in June so that the United States could more effectively seek out its allies to counter China’s ambitions to dominate key industries.

China is also accelerating the pace of “decoupling” from the United States by directing tech companies to avoid US IPOs and instead be listed in Hong Kong. This was a major blow to Wall Street firms, which received massive advisory fees from Chinese companies that listed their shares in the US.

The Treasury Department, which has close ties to Wall Street, is far more cautious about making enemies of China than the Office of the United States Trade Representative, a separate cabinet agency that oversees trade policy. Mr. Biden’s trade representative, Katherine Tai, has said little about the Phase 1 agreement so far, choosing instead to emphasize that the administration is still developing its policy towards China.

Ms. Yellen’s formal meetings with her Chinese colleagues have so far been infrequent. The Treasury Department announced last month that it held a virtual meeting with Liu He, the Chinese vice premier. They discussed the economic recovery, areas of cooperation, and Ms. Yellen expressed her concerns about China’s human rights record.

He publicly voiced these concerns in a speech in Brussels this week, telling European finance ministers that they must work together against “China’s unfair economic practices, abusive behavior and human rights abuses.”

The comment made waves within the Chinese government. Chinese Foreign Ministry spokesman Zhao Lijian said that Yellen’s words “China categorically rejected” and described them as defamation.

The Biden administration has been praised for taking a hawkish stance against China without the provocative approach of the Trump administration, which has destabilized the global economy with tariffs and the trade war.

“Joe Biden did what he said he would do – rallying allies and aligning America on similar issues in a way that greatly strengthens America’s position vis-à-vis China,” US President Craig Allen said. US-China Business Council.

Hudson Institute researcher Michael Pillsbury, one of Mr. Trump’s best advisers in China, said the Biden administration’s approach to China has been shaped to be tougher and “more effective” than Mr Trump’s because Mr. Biden’s aides are united in their joint action. told. He is of the opinion that the United States cannot be successful against China alone.

The big question is what happens next.

Bown of the Peterson Institute said it probably took too long for the Biden administration to review China trade policy because it is a complex portfolio of actions taken by the Trump administration that is so sweeping and sometimes contradictory. There are also complex political calculations to be made when it comes to removing tariffs.

“Looking weak in China is politically toxic, so in terms of your economic arguments you’ll have to get your ducks back to back,” said Mr Bown.

Despite recent hostility, the United States was able to help persuade China to join the union. global tax treaty That Miss Yellen helped brokerage. The Biden administration believes that China wants to be a part of the multilateral system and that cutting ties between the two countries completely would not be healthy for the global economy.

Yellen added that the relationship must balance security requirements. “Clearly, national security considerations must be very carefully considered, and we may need to act where we really see a national security need, whether it’s Chinese investments in the United States or other supply chain issues.”

Keith Bradsher reported from Beijing.