US business surrenders to China in trade war?

 David Goldman:

The U.S. has lost the trade war with China, according to the whole of corporate America. I write at Asia Times:

NEW YORK – Never before in US political history has the whole of the American business community—more than thirty major business organizations—spoke with one voice as it did in an August 5 appeal to the Biden administration to eliminate tariffs on imports from China.

No entities in American politics are timider than business lobbies, most of whose work involves quiet lobbying for administrative relief and legislative tweaks. Such a high-profile intervention suggests that the business organizations believe that a deal is already underway.

A deal is likely because inflation could poison the Democratic Party’s chances at 2022 mid-term elections and return control of the US Congress to the Republicans. Cutting tariffs is the quickest way to reduce inflation. Beyond the arithmetic of electoral politics, a consensus is emerging that the technology sanctions that Trump imposed on China have failed and may even have backfired.

More than 30 business groups including the Chamber of Commerce, the Business Roundtable, the Semiconductor Industry Association, as well as retailer, farm and manufacturing representatives asked Biden to cut tariffs and restart trade talks with China.

The letter stated: “A worker-centered trade agenda should account for the costs that US and Chinese tariffs impose on Americans here and at home and remove tariffs that harm U.S. interests.”

Shout “Traitors!” all you like: The sad fact is that the Trump tariffs did nothing to stem the flood-tide of Chinese imports to the United States. We now import $550 billion a year of Chinese goods, and the volume jumped above trend during 2021.

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Now, that’s $550 billion vs. manufacturing output of $2.4 trillion. Nearly a quarter of the industrial products we consume come from China. And we’re not investing in manufacturing capacity in the U.S. CapEx for the industrial sub-index of the S&P 500 will be down 30% this year vs. pre-pandemic levels in 2019. We have shortages of industrial goods (try to buy a used car) across the supply chain, and we’re doing nothing about it.

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The used car market is a victim of the chip shortage which is reducing the availability of new vehicles.   Dealers are driving up the price of used cars just to get some inventory on their lots.  There appears to be no attempt to ramp up chip production in the US to avoid this supply crunch.  I see not strategic planning from the Biden administration in dealing with this problem.  Surrendering to China will only increase vulnerability and will only make matters worse.  If the tariffs did not work, other means must be tried to stay competitive.