China risks losing top trade status with U.S.

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, 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.

Republican Sens. Tom Cotton of Arkansas, Rick Scott of Florida, Ted Budd of North Carolina and J.D. Vance of Ohio have introduced legislation that would revoke China’s permanent favorable rating and require an annual presidential review.   

“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 from other trade pariahs including Cuba, North Korea, Russia and Belarus. The U.S. suspended its normal trade relations with Russia and Belarus last year in response to Moscow’s decision to invade Ukraine.

The special trading status that China has had since 2000 also is blamed for the China trade shock that has 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 pledged to revoke China’s preferred trade status if he wins the White House again.

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

Mr. Trump said the trade crackdown would spur a U.S. manufacturing renaissance that both major political parties in Washington have long sought.

Republicans and Democrats also have coalesced in opposition to Beijing as U.S.-Chinese relations 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 has remained unabashed in his pursuit to chip away at the U.S.-Chinese 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.

U.S.-Chinese trade hit a record high of $690 billion last year despite increasingly tense relations. 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 an array of goods imported from China after the Office of the U.S. Trade Representative launched an investigation into China’s discriminatory trade practices.

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

Mr. Biden has left the Trump-era tariffs in place, though the trade policy office 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 this year by Trade Partnership Worldwide, which was cited in a Cato Institute report last month, found that the Trump-era duties resulted in more than $166 billion in annual direct tariff costs from 2018 to 2022.

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

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

For some products, there are simply few alternative sources outside China. That has forced companies to pass the additional costs from the tariffs on to consumers but has had little impact on Chinese producers.

Under the Trump-era tariffs remaining, 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 year after the tariffs took effect. In 2022, though, the U.S.-Chinese trade deficit grew 8.3% from the previous year.

Proponents of revoking China’s vaunted trade status said warnings about economic harm to 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.”

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

“Where is the tough on China part?” she said. “It’s only making America worse off.”