The U.S. and China finally signed a trade agreement. Who won?



Jiakun Jack Zhang | Washington Post

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 — which include many intermediate inputs and capital equipment, such as chemicals and machinery. The 15 percent tariffs on $120 billion in Chinese products 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.

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.

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