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The American Consumer Market of the 21st Century
For the first 20 years of the 21st century, prices for many consumer products in America’s stores decreased. This price drop was primarily due to the surge of imports from China and other emerging economies, making items such as video games, T-shirts, dining tables, and home appliances more affordable.
However, these imports led to the downfall of several American factories, causing job loss for more than a million workers. On the other hand, discount stores and online retailers such as Walmart and Amazon prospered due to the sale of low-priced goods made abroad. This general discontent led to the election of presidents who pledged to combat China on trade policies in 2016 and again in 2020.
An Era of More Expensive Chinese Goods
Both former President Donald J. Trump and current President Biden attempted to boost and safeguard American factories by making Chinese goods pricier – they implemented taxes on imports in traditional industries like clothing and appliances, industries that have been dwindling in the last quarter-century, and also growing industries that are grappling with China’s global competition, such as solar panels.
The recent decision of President Biden to formalize and amplify tariffs imposed by former President Trump suggests that the U.S. has finished off an era that favored trade with China and prioritized the benefits of lower-cost products over the loss of localized manufacturing jobs.
Bipartisan Economic Engagement with China
Both Democrats and Republicans used to collaborate on economic engagements with Beijing. The motivation behind this was the theory that outsourcing of production to countries capable of manufacturing goods more affordably would lead to overall economic gain despite the potential job loss for some American workers.
However, both parties are vying to sever these ties due to increasing concerns about China’s labor practices, intellectual property theft from foreign businesses, and generous subsidies for factories that produce more than Chinese consumers can purchase.
What new era of policymaking will emerge from these political incentives remains uncertain. Nor is it clear whether the American public, still recovering from the country’s fastest inflation spike in 40 years, will accept the potential discomforts that may accompany this transition.
The Effect on Voters and Consumers
David Autor, an economist at the Massachusetts Institute of Technology, explains that a new consensus has not formed since the old one disintegrated. He warns that voters and consumers cannot expect to have it both ways. If the U.S. wants to maintain and regain leadership in technological areas, prices will increase, and it is uncertain if the strategy will work.
Contrasting Views of U.S.-China Economic Engagement
Despite both politicians’ shared embrace of some forms of protectionism, Mr. Biden and Mr. Trump offer voters differing visions of how the American economy should interact with China in their rematch election.
Mr. Trump advocates for dismantling trade bridges between the two largest global economies and drastically reducing trade overall. In contrast, Mr. Biden suggests protecting strategic industries using tariffs and other regulations, apart from providing companies in these sectors with billions in government subsidies.
Opinions of Economists
Many economists criticize both candidates’ plans, suggesting they may hinder economic growth. They argue that cutting off Chinese competition may compel companies and consumers to spend money on artificially costly domestic goods rather than innovative products that could foster new industries and jobs.
Jennifer Harris, a former Biden advisor and current leader of the Economy and Society Initiative at the William and Flora Hewlett Foundation, advocates for pairing industrial policy spending with stricter rules on what recipients can do with the funding.
Public Response to Economic Measures
Polls suggest that voters are highly concerned about price increases, which are linked to supply chain issues and government stimulus measures as the world is emerging from the Covid-19 recession.
The authors say these concerns could potentially damage Mr. Biden’s chances of re-election. Persistent hikes in prices due to new tariffs could also negatively affect Mr. Trump’s approval ratings if he regains the presidency.
The Future of China Policy
The prevalent political questions are causing uncertainty about what the future of China’s policy will eventually become.
Mr. Autor suggests that Mr. Biden should abandon support for industries where China has significantly reduced costs like solar cells. His latest research article, written with several economists, suggests that while Mr. Trump’s tariff-focused approach did not lead to a substantial revival of American factory jobs, the policy seemed to draw more votes for Mr. Trump and his party.
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