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Tai Says Strategic vs. Non-Strategic Section 301 Targets 'Not Obvious'

U.S. Trade Representative Katherine Tai said that talking about tariffs more than other aspects of trade policy is, to a large degree, "a red herring," and said reducing U.S. trade policy "down to a conversation about tariffs is really unfair."

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Tai, who was speaking at the Council on Foreign Relations Feb. 12, received several questions about whether retaining all the Section 301 tariffs on China is productive, and each time, she mostly batted the question away, or said it was a good question, without giving an answer.

Georgetown Law Professor Jennifer Hillman cited a David Autor study to Tai, which said the Section 301 and Section 232 tariffs did not bring any jobs back to protected sectors, didn't help the Midwestern economy, and caused significant harm to farmers who relied on China as a market. "What the tariffs did do is increase the political support for Trump and for the Republican Party," Hillman said the study showed.

So, she asked Tai, how does the Biden administration have any room for maneuvering on these tariffs?

Tai responded with the red herring remark, and said that tariffs "are a tool for remedying unfair trade." She said she likes how the EU calls them trade defense instruments.

"You're right that we have kept a lot of the tariffs, because we see strategic values in those tariffs in this exercise of building up the middle class and reinvigorating American manufacturing," she said. While she did not directly address the study's conclusion that the tariffs did nothing to reinvigorate manufacturing, she said it's not possible to isolate the tariffs' effect from the funding in the CHIPS Act, the Inflation Reduction Act and infrastructure spending (much of which has Buy America provisions).

"When taken together, I would welcome anyone to do a study and look at all of these working in concert," she said, and added that close to a million additional manufacturing jobs have been created since President Joe Biden took office.

Tai was interviewed by former USTR Michael Froman -- once Tai's boss when she was a career staffer at USTR -- who asked her if she tells Americans that in order to diversify supply chains away from China, it can exacerbate inflation.

Tai said American critical dependencies are bad for both national security and from a geopolitical standpoint. She acknowledged that goods may cost more in the short term, but argued that over the medium term, having a less concentrated supply chain helps to manage the risk of inflation, because no one supplier can distort the market and jack up prices.

McLarty Associates' Kelly Meiman Hock asked Tai what might happen if tariffs are hiked across the board, as former President Donald Trump has proposed.

Tai answered, "Tariffs shouldn’t be applied just for tariffs’ sake," and that the U.S. and its partners need to work on a constructive vision for more sustainable trade that provides gains for more workers and countries.

Froman told Tai that former Peterson Institute for International Economics Fellow Chad Bown identified which products on the Section 301 list were strategic, and which were non-strategic. He asked Tai what the justification is for retaining punitive tariffs on the non-strategic list.

Tai first said that Bown is now a chief economist at the State Department, and quipped: "Does he still stand by that categorization?"

She then said: "It’s a really, really important question and that’s a hard one. We clearly didn’t think surgical masks and gloves were strategic. We let it go wherever it was going to go. And in the early days of the pandemic, boy did that hurt a lot."

Tai then argued that the domestic textile industry is strategic, and reminded the audience that it has been politically important at USTR for a long time; USTR has a specific textiles office.

"It was that textiles industry, what we still have, that was able to repurpose their capabilities … and to save us," she said. "Where you draw the lines on strategic and non-strategic, it’s not necessarily obvious."