Last week’s G-7 meetings provided an opportunity to resolve the growing international tensions over tariffs. Simply removing the tariffs enacted by and against the U.S. over the past five years would create thousands of jobs while lowering prices on hundreds of billions of dollars of goods. It would also go a long way toward easing other diplomatic tensions. Sadly, there is no guarantee that leaders will do the right thing.
Take, for example, the prospect of digital taxes that several European governments have advocated in recent months. The rationale, of course, is that they would be a favorable way to tax wealthy U.S.-based tech companies. The U.S. government is not happy about this and at the beginning of the month, threatened to raise tariffs against six countries if they do enact them. The Biden administration would be wise to drop this idea and, instead, remove existing tariffs that are already hurting Americans.
The proposed digital-tax tariffs are technically already in effect, though they were immediately suspended for six months to allow time for negotiations, so no revenues have yet been collected. If the strategy fails and the administration follows through on its threat to introduce tariffs in response, American consumers will start paying higher prices in time for the holiday shopping season. The 25 percent tariffs would affect a total of about $2 billion of goods from Austria, India, Italy, Spain, Turkey, and the United Kingdom, most of whom were represented at last week’s meeting. Affected goods include clothing, cosmetics, and optical lenses.
U.S. Trade Representative Katherine Tai announced the tariffs on June 2, without congressional input, citing Section 301 of the Trade Act of 1974 — the same provision that President Trump used to justify his tariffs on China. The new boss, it turns out, is not that different from the old boss.
Tai views tariffs as a source of leverage. Yet our recent experience with China shows this not to be the case. Indeed, four rounds of tariffs plus the Phase One agreement — designed to encourage structural change in China’s economic and trade regime — netted no substantive reforms from Beijing.
To be sure, it might be different story with the six countries that the Biden administration is currently threatening. They are mostly allies who are more interested in maintaining a positive relationship with the United States than was China. But a new tariff is not the only source of potential American leverage. Existing tariffs are, too.
Read the full article at National Review.