The worldwide spread of the coronavirus has sickened and killed thousands of people, displaced millions of workers from their jobs and wiped out trillions of dollars of value in global stock markets. It has also emboldened critics of globalization and trade with China.
Certain members of the Trump administration and Congress have ramped up their criticism in recent days, claiming that the virus confirms their warnings that the United States is too dependent on China for imports, especially critical pharmaceutical and medical supplies. But a closer look at our trade with China shows that their warnings are misguided and threaten to compound the mounting cost of the virus.
In 2018, before the administration fully implemented its Section 301 tariff war against China, Americans imported $539.7 billion in Chinese-assembled goods. That accounted for 21 percent of total U.S. imports and less than 3 percent of U.S. gross domestic product. Considering that China is the world’s top exporter of goods and the world’s second-largest economy, there is nothing abnormal about that level of trade.
U.S. imports of pharmaceutical products and ingredients from China in 2018 totaled $3 billion, a mere 2.2 percent of total U.S. imports in that category, according to the Department of Commerce. Imports of medicinal equipment and supplies from China, the other major category of health-related products, totaled $5.1 billion. That is a larger share at 12.2 percent of total imports in that category, but still nothing that should cause undue worry. Other leading suppliers include the EU, Mexico, Canada, South Korea and Japan.
China has been the predominant source of imports in such categories as mobile phones, computers, apparel, toys, furniture and household goods. But it is hard to argue that such reliance has any negative effect on the health of Americans during the current pandemic or U.S. security in general. In fact, the widespread availability and affordability of laptops and other consumer electronics are helping Americans adjust to the reality of social distancing and working remotely.
In a timely paper, Chad Bown of the Peterson Institute for International Economics notes that China has been a leading supplier of certain specific health-related items such as disposable medical headwear, thermometers and hand sanitizers. U.S. imports of these much-needed goods from China have indeed been disrupted during this critical time, but the cause of the disruption has been the U.S. government, not Beijing.
According to Bown’s analysis, the Trump administration’s Section 301 tariffs, which have been levied against Chinese goods since 2018, have reduced America’s access to critical medical supplies at a time when they are needed most. The Trump tariffs of up to 25 percent were imposed on a range of Chinese medically related products despite testimony by Linda O’Neill of the Health Industry Distributors Association to the Office of the U.S. Trade Representative in June 2019 (cited by Bown) that such tariffs compromise the nation’s public health preparedness. And that is just what has happened.
“In the last two years,” Bown writes, “Trump’s policy has forced China to divert the sales of these products—including protective gear for doctors and nurses and high-tech equipment to monitor patients—from the United States to other markets, and now the U.S. medical establishment faces looming trouble importing these necessities from other countries, which may be hoarding them to meet their own health crises.”
As it seeks to mitigate the impact of the coronavirus, the U.S. government should remove the artificial barriers it has imposed that prevent Americans from buying critical medical supplies from the most affordable and ready supplier possible, whether that is China or any other nation.
The Trump administration did quietly lift selected tariffs last week on certain medical supplies from China, but it should go further and repeal all of the misguided Section 301 tariffs it has imposed in the past two years. A growing chorus of members of Congress and business groups are urging the administration to do just that.
Lifting the Section 301 tariffs would help to alleviate shortages of needed medical supplies, while restoring established supply chains and boosting business and investor confidence in the face of stock-market volatility. The Congressional Budget Office recently estimated that leaving the tariffs in place in 2020 would cost the average American household $1,277. Since it is American consumers who ultimately pay the tariffs, repealing import taxes would put money directly and immediately into the pockets of American families and businesses.
The right trade-policy response to the coronavirus epidemic is not to pile new burdens on the ability of Americans to source medical supplies and other goods from China. It is to remove the barriers our own government has imposed at great cost.
Daniel Griswold is a senior research fellow and co-director of the Trade and Immigration Project at the Mercatus Center at George Mason University.