Last week, President Trump and Vice Premier Liu He of China met in Washington to sign a “phase one” trade deal. So what happens to U.S. tariffs on Chinese exports, which have increased sixfold since 2018? And what does this mean for the broader U.S.-China relationship?
Most of these tariffs remain in place after the Jan. 15 deal. American businesses and consumers will continue to pay 25 percent tariffs on some $250 billion worth of Chinese exports (Lists 1, 2, 3) — which include many intermediate inputs and capital equipment, such as chemicals and machinery. The 15 percent tariffs on $120 billion in Chinese products (List 4, which includes consumer products like clothing and textiles) will be halved, however.
This suggests the “transformative” phase-one deal is more an uneasy cease-fire than an end to trade tensions. For many industries that import intermediate goods from China, the deal confirms that tariffs are the “new normal.” That’s not welcome news to business leaders, of course. The Trump administration’s tariffs have caused significant damage to U.S. manufacturing. They have led to higher prices and fewer jobs, according to a recent Federal Reserve study.
For Trump, it was a summer of tariffs and more tariffs.
The persistence of tariffs despite obvious economic costs has also been a source of consternation for Chinese analysts and policymakers, who anticipated interest groups harmed by tariffs would constrain Trump in trade negotiations.
A strategic miscalculation for Beijing?
China has now committed to purchase an additional $200 billion in U.S. goods over the next two years, reduce various agriculture barriers, boost intellectual property protection, liberalize its exchange-rate policy and financial services sector, and end forced technology transfers.
Chinese state-run media have been in damage control mode to spin these as “deepening reforms” — not concessions. In fact, the deal contains little to address Beijing’s three core concerns: elimination of all tariffs, realistic trade purchase demands, and an agreement that balanced demands on both sides.
China retreated from its initial negotiating position that all tariffs must cease, as a basis of any trade deal — the phase one deal consists largely of unilateral Chinese concessions. The size of the purchase agreements surprised even U.S. observers.
The signed deal also suggests China’s strategy to “seek peace through war” by targeting vulnerable Republican districts with retaliatory tariffs appears to have achieved less than Beijing hoped. China, it seems, was overconfident in its ability to use U.S. interest-group politics to leverage Beijing’s position in the trade talks.
How trade lobbying fell short
The U.S. business community — a powerful force in economic policymaking — has long acted as a ballast in the U.S.-China relationship. More than 150 business associations joined forces in opposition to the U.S. tariffs, and lobbying on trade issues skyrocketed after 2018. But if money talks in American politics, then why have U.S. businesses failed to constrain the president — even though many U.S. companies see the trade war as bad for business?
Why Republicans don’t push back on Trump’s China tariffs — in one map
In their 2015 book, Helen Milner and Dustin Tingley explain that in “normal” trade politics, interest-group lobbying and political pressure constrain the president because trade policies affect such a wide swath of business interests and voters — what political science calls “distributive politics.” And ideological divisions within the United States also act as a constraint on trade policy. Historically, Republicans opposed tariffs as unwanted government intervention, while Democrats tended to be suspicious of trade liberalization.
Trump’s trade war with China turned these expectations on their heads. The president appears unconstrained by either interest groups or Congress. His administration pursued a strategy of compensating farmers while largely ignoring the needs of manufacturers, retailers and consumers. Here’s how this played out.
Was this a ‘tragedy of the commons?’
Powerful business groups lobbied hard against tariffs — perhaps too hard. The channels for access in Washington remain constant, but the flood of firms trying to squeeze through these channels may have crowded out one another. Research by In Song Kim has shown a typical trade bill might have just one lobby group’s attention. By contrast, more than 4,000 firms attempted to lobby the office of the U.S. Trade Representative and Congress on the Section 301 tariffs.
The USTR exclusion process lets companies try to protect their own products from tariffs. Companies facing higher costs because of tariffs are incentivized to hire lobbyists to seek individual exclusions for their own products and undermine the requests filed by competitors. This results in a classic tragedy of the commons — few companies succeeded in obtaining tariff exclusions, and the majority of U.S. firms will continue to pay the cost of high tariffs.
Ideological convergence over China
In addition, the traditional ideological division between Republicans and Democrats over trade retreated during the China trade war. Instead, a bipartisan consensus seemed to emerge, with U.S. policymakers seeing trade issues as part of the broader U.S.-China competition. When ideological divisions are high, different political beliefs about other countries’ motives and actions can constrain the president in setting foreign policy.
A more assertive Beijing raises new questions for U.S.-China relations
But Chinese foreign policy under President Xi Jinping, including the Belt and Road Initiative, have only reinforced the narrative in Washington that China is becoming increasingly assertive. In multiple interviews I conducted with U.S. policymakers, the message was clear: Being tougher on China is the only bipartisan issue that everyone can agree on.
My co-authors and I have traced the roots of this backlash to the China trade shock — some U.S. communities were hit far harder by the surge in Chinese exports. Republican legislators from import-competing districts blame China for the economic dislocations in their districts. Trump’s China-bashing campaign seized upon the gap between Republican leaders and voters on support for free trade, and his election marked an end to decades of Republican orthodoxy on trade and China.
What happens now? This bipartisan consensus around confronting China is unlikely to fade, regardless of who wins the presidential election. Selective decoupling of the two economies will continue as the inevitable consequence of tariffs remaining in place. But as negotiators prepare for the “phase two” trade negotiations, distributive politics may become more salient as the burdens of tariffs push interest groups to better coordinate their lobbying efforts.
Jiakun Jack Zhang (@HanFeiTzu) is an assistant professor of political science at the University of Kansas, where he studies the political economy of trade and conflict in East Asia.