Time to Change Tack on Tariffs

It has been a busy couple of weeks in the Office of the U.S. Trade Representative. Last week, Ambassador Robert Lighthizer, the U.S. Trade Representative, appeared before committees in both chambers of Congress to testify about the president’s trade agenda and tariffs on Chinese imports. The USTR also heard testimony from over 325 witnesses—companies and trade groups—about the latest proposed tranche of Section 301 Tariffs. That hearings marathon wrapped up Tuesday.

The administration’s stated goal with this latest round of tariffs is to convince China to cease their predatory and anti-competitive trade practices. But, in testimony and questioning over the past week, senators, representatives, companies, and industry leaders alike expressed deep concern over the potential harm tariffs will bring to the U.S. economy.

These concerns are valid. The tariffs, which will cover technology products, intermediate goods,  and more, will be especially harmful to the startup ecosystem. Startups are not positioned to absorb the additional costs imposed by the tariffs, and lack the resources to secure an exemption. Startups are drivers of innovation in the American economy. Engine believes these tariffs will dampen startup activity, chill growth and innovation in the technology sector, and lead to fewer jobs and higher costs.

The Trump administration is rightly concerned about China’s cyberattacks, IP-theft, forced technology transfers, and other practices that impose great harm to the tech industry. Using tariffs as the policy tool to accomplish these goals, however, will only harm the stakeholders they hope to protect. Instead, the administration should utilize targeted action to counter and seek change to these Chinese tactics. 

When pressed by members of Congress on pursuing other avenues, Ambassador Lighthizer has highlighted his “Trilateral Group” meetings as alternatives to tariffs the administration has sought. Multilateral pressure on Beijing is a good strategy. The Ambassador should expand upon this approach in the international arena by further incorporating our allies, and bringing cases to the WTO. China has historically reformed in a market-oriented direction in response to WTO cases. Accordingly, the administration should pivot toward a new strategy, rather than re-upping economy-damaging tariffs.