Reducing tariffs on China by even a “moderate” amount would benefit the US economy, according to a study by a business council and an economics firm.
The report released Thursday came as the United States awaits the inauguration of President-elect Joe Biden on Wednesday, who is expected to detail his trade policy the following day.
Commercial ties between Washington and Beijing deteriorated under outgoing president Donald Trump, who launched a trade war against China that was partially resolved with an agreement struck early last year.
With both his Democrats and the opposition Republicans viewing Beijing as a strategic threat, Biden has thus far signaled only that he won’t immediately make major changes to trade policy with China, and will likely find ways to better collaborate with allies like the European Union.
But even merely relaxing the tariffs imposed during the trade war would help the US economy, which is going through a rocky recovery amid the coronavirus pandemic, according to the report from the US-China Business Council representing 200 firms operating in the Asian country, and Oxford Economics.
If “both governments gradually scale back average tariff rates to around 12 percent (compared with around 19 percent now), the US economy produces an additional $160 billion in real GDP over the next five years and employs an additional 145,000 people by 2025,” the report said.
Increased employment and earnings as well as lower prices would also push up income by about $460 per household, the report said.
But if Washington were to double down and attempt to separate its markets from China, the US economy would “produce $1.6 trillion less in real GDP terms over the next five years… (resulting) in 732,000 fewer jobs in 2022 and 320,000 fewer jobs in 2025,” according to the report.
GDP would also be lowered permanently, and by 2025, American households would have lost $6,400 in income, the report said.
