Higher tariffs to harm US consumers and exporters; economic decoupling from China unlikely experts reveal

Ramping up US import tariffs or attempting to decouple the US economy from China will most damage US consumers, retailers and exporters, according to leading supply chain experts.

Former president Trump has promised to increase tariffs on imported Chinese goods to over 60% and introduce a 10% universal import tariff if he wins the Presidential election later this year. This would add to the tariffs from his first administration and the newer ones introduced by President Joe Biden, including on Chinese EVs.

However, Jason Miller, Eli Broad Professor in Supply Chain Management at Michigan State University, told the latest episode of The Freight Buyers’ Club, that authoritative research into US tariffs since 2018 shows no clear economic benefits to the US heartland. He noted that retaliatory tariffs on US exports have had clear negative impacts on employment, primarily in agriculture.

Miller argued that any increases of existing tariffs would exacerbate these negative impacts, as retaliation from China and other countries would harm US export industries.

“I see no economic upside to this,” he said. “It will be a tax on consumers. And frankly, I think it's one of the dumbest economic policies I've ever heard of.”

Jessica Dankert, Vice President Supply Chain, Retail Industry Leaders Association (RILA), said “tariffs are taxes on American businesses, consumers and workers”.

She added: “Retailers basically want to see the US government focus on smart trade policy that opens up new markets, reduces tariff and non-tariff barriers and addresses unfair trade practices, without this unnecessary collateral damage to American businesses and consumers.”

Decoupling the US economy from China

Robert O'Brien, former President Trump's last national security advisor, recently stated that Trump’s plans to escalate the trade war with China did not go far enough.

“As China seeks to undermine American economic and military strength, Washington should return the favour,” O’Brien wrote in Foreign Affairs, adding that “Washington should, in fact, seek to decouple its economy from China’s.”

However, Dankert argued that a 100% decoupling of the US economy from China is “simply not realistic” in a globalised economy.

Jason Miller was even more dismissive, saying, "We're not decoupling with China short of a war. There's just no way at this point; the two economies are so intertwined."

Miller also questioned what 'decoupling' really means economically. "If we're not buying directly from China, but it's instead produced by a Chinese company in Mexico or Vietnam, that's not decoupling," he explained. "In a world of transnational manufacturers, these ideas of decoupling just don't exist. This is not the Cold War."

He noted that many proponents of these policies draw from Cold War-era ideas. "We need more contemporary thought considering the globalized nature of the US economy," he added.

Elsewhere in the podcast, produced with the support of Dimerco Express Group, Dankert and Miller discuss global supply disruptions in 2024, restocking strategies, US domestic freight market dynamics, and the looming threat of union strikes and natural disasters on logistics.