Shouldn’t Biden Be Thanking China for Not Following Through on the Purchase Commitments in Its Trump Trade Deal?

10/05/2021 12:00am

Both the New York Times and Washington Post reported on the Biden administration’s complaints that China had not followed through on the commitments it had made in a trade deal with Donald Trump to buy large amounts of various US products. While it is reasonable to expect that countries will follow through with promises they made in trade agreements, in this case, China likely did the United States a favor. With widespread supply chain problems due to the pandemic and unusual weather conditions, additional sales to China might well have caused even greater bottlenecks in the effort to meet domestic demand. (China cited the pandemic as the reason its purchases fell short.) For this reason, China likely did the United States a favor by not carrying through with the promised purchases in the trade deal.

It is also worth noting that in the building economic confrontation with China, the Biden strategy seems likely to further increase the upward redistribution of income that we have seen over the last four decades. Thanks in large part to our past trade policies, manufacturing jobs no longer carry a substantial wage premium over jobs in other sectors. This means getting back several hundred thousand manufacturing jobs will not provide any substantial benefit to less-educated workers. 

On the other hand, the sort of protectionist policies being promoted by Biden, which involve protecting our most high-tech industries from Chinese competition, are likely to result in higher prices for the output from the protected sectors (thereby lowering real wages for households) and higher pay for the highly educated workers in these sectors. This is yet another way to use trade policy to redistribute income upward.

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