GOP senators lead charge on revoking China’s trade status, but policy crackdown could hurt consumers

China’s antagonistic foreign policy and manipulative economic practices have Washington lawmakers rethinking the decades-old preferential trade treatment that the U.S. bestows on the communist regime.

Critics of the Clinton-era policy endowing Beijing with Permanent Normal Trade Relations status, which was previously known as Most Favored Nation status or MFN, say the U.S. is unduly rewarding the Chinese Communist Party at the expense of American jobs and national security.

That’s why Republican Sens. Tom Cotton of Arkansas, Rick Scott of Florida, Ted Budd of North Carolina and J.D. Vance of Ohio introduced legislation that would revoke China’s permanent favorable rating and instead require annual presidential approval to maintain Beijing’s trade status.   

“For twenty years, Communist China has held permanent most-favored-nation status, which has supercharged the loss of American manufacturing jobs,” Mr. Cotton said. “China never deserved this privilege in the first place, and China certainly does not deserve it today.”

Imports from countries that do not have so-called normal trade relations with the U.S. are slapped with higher tariffs than those from countries in good standing.

Should China lose its status with the U.S., its goods would be lumped in the same category as those coming out of other trade pariahs including Cuba, North Korea, Russia and Belarus. The U.S. suspended its normal trade relations with Russia in Belarus last year in response to the invasion of Ukraine. 

The special trading status that China has enjoyed since 2000 also is blamed for the “China Trade Shock” that contributed to the demise of U.S. manufacturing and a surge of imports.

“In the state of Ohio, we have lost over 130,000 jobs since Congress made the catastrophic mistake of granting China special trade privileges two decades ago,” Mr. Vance said. “I have seen the devastating effects of this job loss firsthand, and I know it’s past time we did something to reverse that trend.”

In a speech on Saturday at the Conservative Political Action Conference on the outskirts of Washington, former President Donald Trump also pledged to revoke China’s preferred trade status.

He even went a step further in a campaign video earlier this week in which he laid out his 2024 vision for holding Beijing accountable, saying he also would impose a “bold series of reforms to completely eliminate dependence on China in all critical areas.” 

He said the trade crackdown would spur a U.S. manufacturing renaissance long sought by both parties in Washington.

Such tough-on-China rhetoric isn’t out of the norm from either party. Republicans and Democrats have coalesced in opposition to Beijing as U.S.-China relations continue to sour.

Democrats are almost uniformly more hawkish toward Beijing than they were just a few years ago. The party now backs billions of dollars in subsidies to spur domestic manufacturing and chip away at U.S. reliance on China for critical goods.

Still, no Democrats have come forward in support of the Senate legislation to walk back China’s permanent trade status.

President Biden has tempered his party’s more aggressive stance with assurances that the U.S. seeks “competition, not conflict” with Beijing, and he has remained unabashed in his pursuit to chip away at the U.S.- China trade imbalance.

The problem for China hawks in both parties is America’s dependence on goods produced in China, which includes a host of familiar U.S. brands.

The U.S.-China trade hit a record high of $690 billion last year despite the increasingly tense relations between the two countries. The majority of the trade was U.S. imports of Chinese goods at $536 billion — creating a U.S. trade deficit with China of $382 billion, up from $83 billion in 2001.

Revoking China’s premium trade status would likely increase tariffs on Chinese goods and inflict higher costs on American businesses and consumers.

Indeed, a wholesale increase in tariffs on Chinese goods may be a tougher sell to Americans already struggling with high inflation.

“Tariffs have not been an effective tool at changing China’s economic policies,” Gabriella Beaumont-Smith, a policy analyst at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, told The Washington Times. “Simply by revoking the MFN status, all that’s going to do is the same as what happened under [Mr. Trump’s 2018 tariffs]. It’s just going to make products from China more expensive for American businesses and ultimately consumers.”

Under the Trump administration, the U.S. imposed tariffs on a vast array of goods imported from China following a U.S. Trade Representative investigation into China’s discriminatory trade practices. 

China was hit with duties of up to 25% on more than $300 billion worth of Chinese goods.

President Biden has left the Trump-era tariffs in place, though the USTR has launched a four-year review of the actions that could result in a rollback of the tariffs.

Trade analysts said the policy meant to crack down on China’s abuses backfired on American consumers.

A study published earlier this year by Trade Partnership Worldwide, which was cited in a Cato Institute report last month, found that between 2018 and 2022, the Trump-era duties resulted in more than $166 billion in annual direct tariff costs.

Those costs were most pronounced for U.S. imports of Chinese apparel, footwear, travel goods and furniture.

The Cato report noted that while the tariffs forced U.S. companies to find alternative sources in countries outside of China, the policy did not result in any significant increase in domestic manufacturing.

For some products, there are simply few alternative sources outside of China forcing companies to pass the additional costs from the tariffs on to consumers while having little impact on Chinese producers.

Under the Trump-era tariffs remaining in place, the U.S. trade deficit with China continued to surge. In 2018, the deficit reached a $418.2 billion high-water mark before dropping to $342.6 billion the following year after the tariffs took effect. In 2022, though, the U.S.-China trade deficit grew 8.3% from the previous year.

Proponents of revoking China’s vaunted trade status said that warnings about it hurting American consumers were overblown.

“Denying MFN status for China is not some drastic decoupling move,” Charles Benoit of the Coalition for a Prosperous America wrote in an essay in January. “It should be viewed more as a revenue measure, which nonetheless sends an important message to the global business community that sourcing from China for the United States is not favored.”

But using the Trump tariffs as a guidepost, Ms. Beaumont-Smith is unconvinced.