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Biden has clung to tariffs on China. American business owners say there's a cost

ASMA KHALID, HOST:

With Secretary of State Antony Blinken in China this weekend for high-level talks, we wanted to take a closer look at America's relationship with that country, especially around trade. Made in America may be a catchy political slogan, but it's a lot more complicated than it sounds. So many things we use every day come from China. In 2018, former President Donald Trump launched a trade war with China, eventually slapping tariffs on more than $300 billion worth of imports.

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DONALD TRUMP: For many years, China has been taking out hundreds of billions of dollars a year and rebuilding China. It's time that we rebuild our country.

KHALID: Two and a half years into the Biden presidency, those taxes are still here. To understand why that is, I talked to policymakers, economists and even went out to a factory floor in Minnesota.

DAN DIGRE: Right now, we're building a five-inch speaker.

KHALID: Dan Digre is the president and CEO of the Minneapolis Speaker Company, known as MISCO for short. The company makes all kinds of speakers - for subway cars...

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AUTOMATED VOICE: Step back. Doors closing.

KHALID: ...Drive-thrus...

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UNIDENTIFIED PERSON #1: Hi. Welcome to Wendy's. How may I help you?

KHALID: ...Even airplanes.

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UNIDENTIFIED PERSON #2: Time for takeoff. Touchdown says two hours and 55 minutes.

KHALID: MISCO was a storefront business started by Digre's parents after World War II. Four years ago, Digre moved the company into a spacious new facility that now employs nearly a hundred people.

DIGRE: We're very committed to American manufacturing of loudspeakers, so we built this big facility with a big factory floor.

KHALID: Digre takes me out to the factory floor that produces two to three thousand speakers a day. But he says they could be making more.

DIGRE: This is where I would like to build more production lines.

KHALID: He points to a large area of the factory floor sitting empty.

DIGRE: This should be loaded with equipment right now. Well, part of the reason that hasn't happened is that we're spending our time finding alternative sources to China.

KHALID: That's because MISCO imports a lot of its parts from China. And Digre, not China, gets a bill from the U.S. government to pay the import tariffs. He's on the hook, whether or not he sells the speakers.

DIGRE: We pay a tariff on every part of this speaker except for the magnet, and there's, like, 14 different parts that make up a speaker. All have a 25% tariff.

KHALID: The 25% tariff on all these little parts adds up. But the strange thing is when Digre imports a speaker fully made in China, he only faces a 7.5% tariff.

DIGRE: In many cases, what that meant is that more of our product is being built in China now than before the tariffs.

KHALID: Economists say that's the thing about tariffs. They have unintended consequences. Instead of manufacturing more products in America, Digre is now making fewer things in America. When Trump first launched this trade war with China, it was a shock to the economic system.

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TRUMP: The theft of American jobs and wealth has come to an end.

KHALID: Economists warned that Americans would pay the price. U.S. businesses complained they would lose out to foreign competitors, and Democrats piled on Trump for being erratic and haphazard. In the summer of 2020, our former colleague Lulu Garcia-Navarro asked then-candidate Biden about using Trump's tariffs to counter China.

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JOE BIDEN: Who said Trump's idea is a good one?

LULU GARCIA-NAVARRO: Some feel that...

BIDEN: Some - two or three people. Manufacturing has gone in recession. Agriculture lost billions of dollars that taxpayers had to pay. We're going after China in the wrong way.

KHALID: Biden is now running for president again on a vision of making more things in America. He highlights his subsidies to lure factories back from overseas, but he doesn't get into the nitty-gritty of trade policy. And he doesn't talk about these tariffs, but he has kept them. Katherine Tai is the Biden administration's top trade official.

KATHERINE TAI: I think it is important to distinguish between the reason why the tariffs were imposed from how the tariffs were imposed. It was done in a pretty provocative way with a lot of confrontational chest thumping, which I think drew some concerns both internationally and domestically, and I'm putting it diplomatically.

KHALID: But the Biden White House is clear there are legitimate reasons for these China tariffs, like the coercive practice of forcing American companies to hand over their tech in exchange for the right to do business in China.

TAI: The tariffs were ultimately imposed to redress that economic harm and to create a rebalancing in the economic relationship. So now if we fast forward to today, I think that the focus really should be on whether or not we still have this challenge with China. I think it's fairly obvious that the answer is yes.

KHALID: The challenge is not just about economics. There's a lot of tension in the relationship between the United States and China around issues of national security - things like spying and Chinese aggression in the Asia-Pacific region. Still, critics say the tariffs are a tax on Americans - on products like coats, bedsheets, underwear and utensils that, ostensibly, have nothing to do with national security. Earlier this year, an independent, nonpartisan agency called the U.S. International Trade Commission found that American importers had borne most of the costs from these tariffs. So I asked Tai, why not look at the tariffs in a more strategic way?

TAI: We are looking at the tariffs in a very strategic way, and our concern is not just American national security, but also to figure out how we can break our addiction to the lowest cost, chasing of efficiency to redesign our economic policies.

KHALID: What is the distinction that you see between how you and the previous administration relate to China in the context of the tariffs?

TAI: What we do share is a diagnosis that the U.S.-China trade relationship is out of balance, but I think that there are a lot of significant distinctions between our approaches.

ROBERT LIGHTHIZER: They have literally done nothing but follow our policy.

KHALID: That last voice is Bob Lighthizer. He was Trump's top trade official.

LIGHTHIZER: They haven't put any new tariffs on. They have done nothing but follow our policy, yet they criticized the way we arrived at the policy.

KHALID: Still, it's not clear anyone but Trump would have dared to take the first step.

LIGHTHIZER: It's kind of hard to put yourself back in the way we were in 2017. Everyone in town - right? - in Washington was against us.

KHALID: Lighthizer had been a skeptic of mainstream U.S. trade policy for years. He was fed up with the idea that China was getting billions of dollars a year from Americans while stealing U.S. technology. Something, he said, had to change. It was a message that resonated with a company in North Carolina.

GREG PRAY: My name is Greg Pray. I'm the president and CEO of Columbia Forest Products. We make hardwood, plywood and veneer that ends up in cabinets and kitchens.

KHALID: Back in 2017, the Commerce Department found that China was dumping plywood into the U.S., selling it at unfairly low prices.

PRAY: The U.S. manufacturers can compete if we're competing fairly, but we cannot compete if it's an unfair playing field.

KHALID: He says Trump's tariffs showed the U.S. government had their back.

PRAY: There was no criticism in our industry. In fact, there were cheers.

KHALID: And there were other tariffs on plywood, too. Pray says Chinese companies did change their behavior after all of this, but not necessarily for the better.

PRAY: They immediately tried to circumvent it by moving their products, even some of their manufacturing, to other countries, such as Vietnam and Indonesia.

KHALID: Across the economy, imports on tariffed Chinese goods have gone down. But that doesn't mean American manufacturers are getting all the benefits. Imports from Vietnam have more than doubled since the tariffs went into effect. Dan Digre says he's also turned to Vietnam.

DIGRE: Vietnam is developing a loudspeaker industry. It's developing parts suppliers, but it's very new. You know, these supply chains just don't move on a dime, right?

KHALID: He's also shifted to Indonesia for some other components, but he's still relying on China a lot. Plus, he's in that tricky situation. He's paying a 25% tariff for parts from China but only a 7.5% tariff on a fully made Chinese speaker. So he is now an American manufacturer making a majority of his speakers in China.

DIGRE: We've spent about $2 million on tariffs. If we had that money, you would see some very, very high-tech assembly lines set up over here.

KHALID: Digre says he can pass on some of his additional cost to customers but not all - because if he does, he won't be as competitive. So instead, the money has come out of MISCO's profits.

DIGRE: So in some ways, I feel like the tariffs put small manufacturers like us at the front line of that policy, right? We're the ones paying the tariff. We're the ones out trying to find new suppliers. We're the ones who have to deal with this policy, right? And I feel a little bit like a pawn in this big geopolitical game, and all we want to do is build speakers.

KHALID: But in every game, there are winners and losers. And the thing about these tariffs is that the rules are blurred because the game is not entirely about the economy. It's also about keeping China in check.

CHAD BOWN: Five or six years ago, the conversation was about costs and about whether the Chinese system was playing by the rules.

KHALID: That's Chad Bown. He's with the Peterson Institute for International Economics.

BOWN: The conversation has shifted entirely. It's not about that anymore. It's all about national security - the heightened tensions that we're seeing, you know, over Taiwan, military engagement, balloons floating over the United States, things of that nature that we're really having to grapple with today.

KHALID: The Biden administration is currently reviewing the tariffs to determine their approach to them. That process is expected to wrap up this year. I asked Biden's top trade official, Katherine Tai, what's going on with this review.

TAI: I would say that one key question that's really important for us to consider is what has China done in these last few years that would merit our changing this tariff structure?

KHALID: There's been a chorus of Republican and Democratic lawmakers who say China's behavior has not changed. And this all comes against the backdrop of the 2024 presidential election. So Dan Digre - he's not optimistic about change.

DIGRE: It's all about what should I say, what should I do to get me reelected?

KHALID: And you think removing some of these tariffs is not politically popular.

DIGRE: You know, I hate to say this, but it would just get portrayed as being weak on China.

KHALID: And in a presidential election, there's often little political room for nuance. That's even more the case on these tariffs because they were Donald Trump's signature policy, and he's the current Republican front-runner.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

Asma Khalid is a White House correspondent for NPR. She also co-hosts The NPR Politics Podcast.