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New tariffs on imported EVs and other products from China are driven mostly by domestic political calculations in the run up to the 2024 presidential election. At the same time, the tariffs are bad news for American consumers and broader climate goals, and they're a blatant misuse of the Section 301 statute.

Thirty years after its foundation, the World Trade Organization continues to serve a vital role in the global economy. And that's worth celebrating.

The White House called on the US Trade Representative to "consider" tripling the existing Section 301 tariffs on Chinese steel. Closer examination reveals the move to be far more about politics than unfair trade practices.

History has shown that Washington's international economic policies often belie its lofty rhetoric about the importance of the bilateral relationship with Japan, as domestic politics continue to triumph over sound policy.

Revoking China's Permanent Normal Trade Relations (PNTR) status would be particularly bad for American farmers and ranchers.

Policymakers should trust America's traditional strengths: openness to international trade, immigration and market‐​based innovation.

If the United States is going to outcompete China in the 21st century, it needs to quickly emerge from its defensive crouch and pursue an affirmative trade agenda that offers countries a solid alternative.

For policymakers in Beijing seeking to rejuvenate the economy, a return to the market‐​oriented reforms of the past is the key to future growth.

Policymakers in Beijing should learn from successful policy reforms of the past and begin (re)downsizing the role of SOEs in the economy.

If American policymakers are serious about countering China's rise at the nexus of technology, and truly want to foster economic growth and innovation while maintaining global competitiveness, it is crucial to support and encourage a vibrant ecosystem of companies, while avoiding counterproductive efforts that hinder their potential.

Clark Packard


There's been a lot of very loose talk recently from the press, politicians and think tank wonks about "decoupling"—that is, entirely eliminating trade, investment and migration—the United States and Chinese economies. Proponents of decoupling the two economies never grapple with the enormity of the task and thus it's useful to consider what such an idea actually entails as well as the costs to the U.S. and global economies. In reality, a hard decoupling is not nearly as simple and painless as proponents argue. Washington bureaucrats and politicians one day flipping a switch and cutting off all economic ties between the world's two largest economies is as unworkable as it would be economically disastrous.
Practically speaking, in order to operationalize a hard economic break with China, the U.S. would need to hire dramatically more customs agents as well as export control and investment monitors to police everyday transactions. Furthermore, as Adam Posen, president of the Peterson Institute for International Economics, recently noted in an excellent Foreign Policy essay,
A unilateral U.S. withdrawal from commerce with China would be partially offset by other economies taking up market share where the United States no longer operated. If anything, it would increase the arbitrage opportunities for other countries and for companies headquartered elsewhere to trade and invest where the United States ceased to do so.
[…] In order for such restrictions to succeed, the United States would have to become a commercial police state on an unprecedented scale. The United States would also have to monitor and prevent its own headquartered companies from moving activities abroad. Washington has done this, on a limited scale, on specific technology transfers. But scale matters, and current proposals would be an order of magnitude more ambitious and thus infeasible.

Even more daunting than the feasibility of administering such a regime are the tremendous economic costs of a hard decoupling.
When the Trump administration levied extensive tariffs on imports from China—nearly 70 percent of all imports are now covered by an average tariff of 20 percent, up from about 3 percent before the trade war began—the results were predictably bad. According to the New York Federal Reserve, the tariffs cost the average American household an estimated $830 per year when accounting for direct costs and efficiency losses and led to a staggering $1.7 trillion loss in market capitalization for businesses due to slowed investments. My Cato colleague Scott Lincicome and I estimate that the tariffs effectively nullified about half the average household's savings from the Tax Cuts and Jobs Act of 2017.











The tariffs likewise triggered inevitable retaliation from Beijing, which fell particularly hard on American farmers and ranchers, resulting in a massive taxpayer‐​funded bailout program for agriculture producers who lost vital market access in China. Moody's Analytics estimated that the trade war caused the loss of approximately 300,000 jobs. My Cato colleague Alfredo Carrillo Obregon and I recently documented some of the real‐​world harms from the Trump‐​Biden China tariffs, particularly the pain inflicted on a lot of small and medium‐​sized businesses in the United States.
Despite the tariffs, two‐​way goods trade between the United States and China reached an all‐​time high in 2022 on a nominal basis, perhaps owing a bit to U.S. inflation. (Real goods trade, meanwhile, was lower than in 2021, but still represented an increase from 2019 and 2020.) A total ban on trade, investment and migration between the United States and China would make the enormous costs of the Trump tariffs look rather quaint.
If the world economy were separated into disparate economic blocs—one led by the United States and one led by China—the global economy would suffer tremendously. Earlier this year, the International Monetary Fund (IMF) released a study on the economic impact of such a system. In an excellent essay for his own Substack, economist Bert Hoffman summarized the IMF paper's findings,
[T]he costs of investment fragmentation could lower global GDP by 1 percent, and double that for GDP in China. Trade and technology fragmentation can be more damaging still: the cost to the global output from trade fragmentation could range from 0.2 percent in a limited fragmentation scenario to up to 7 percent of GDP (in a severe fragmentation/​high‐​cost adjustment scenario). With additional technological decoupling, the loss in output could reach 8 to 12 percent in some countries. […] These are massive costs.

Indeed, this is not trivial—it's trillions of dollars on a yearly basis. Washington politicians, journalists and think tankers wouldn't bear the brunt of such a policy; as the IMF report notes, "[T]he unraveling of trade links would most adversely impact low‐​income countries and less well‐​off consumers in advanced economies." Meanwhile, economists at the World Trade Organization (WTO) estimate that such a fragmentation as envisioned by some members of Washington's political class would decrease real incomes around the world by 5.4 percent on average. It takes an immense amount of arrogance to simply hand waive away the costs of a hard decoupling.
Perhaps these costs would be worth it if a ban on trade, investment and migration forced Beijing to make holistic changes to its economic practices, but that almost certainly would not be the case. Recent history suggests that China will not change its troubling economic practices due to Washington's protectionism. In early 2018, on the eve of the trade war, other Cato scholars and I predicted that the tariffs would simply impose costs on Americans while doing virtually nothing to change Beijing's course. Sadly, our warnings were prescient: China's aggressive 21st‐​century mercantilism continues apace. Are we really to believe that cutting off all economic exchange between the United States and China will stop, say, Beijing‐​directed cyber hacking into U.S. commercial networks to steal trade secrets? Of course not.
While it is likely that some trade and investment between the United States and China will—and maybe should—decline in this era of strategic competition between near‐​peers, the reality is that a lot of two‐​way trade and investment is largely benign—and in no way "strategic," i.e., at the nexus of technology and national security. Sabine Weyand, the European Union's Director‐​General for Trade, recently noted in an essay for Internationale Politik Quarterly that 94 percent of EU trade with China is "unproblematic" and that only about six percent is the result of a one‐​sided dependency for EU member nations. A comparable analysis for the United States would almost certainly produce similar results.
To be clear, the Chinese Communist Party (CCP) is an increasingly illiberal actor: it is more aggressive on the world stage and repressive at home. Still, of the 1.4 billion people living in China, only about 100 million people have any connection to the CCP. The rest of China's citizens are not responsible for their government's relatively rapid and ill‐​advised turn away from liberalism. The United States desperately needs a thoughtful response to Beijing's economic practices, but mimicking Chinese protectionism and industrial policy is a recipe for stagnation. Last month, my Cato colleague Scott Lincicome and I released a policy analysis charting a better course to outcompete China in the 21st century—one that is much more practical to implement in a relatively globalized world.