Consider This from NPR - Made in America: It's trickier than it sounds

Episode Date: June 18, 2023

Made in America. It may be a catchy political slogan, but it's a lot more complicated than it sounds. So many things we use everyday come from China. In 2018 - former President Donald Trump launched a trade war with the country, eventually slapping tariffs on more than 300 billion dollars worth of Chinese imports. Two and half years into the Biden presidency – those taxes are still here.To understand why, NPR's White House correspondent Asma Khalid spoke with policy makers, economists and even went out to a factory floor in Minnesota.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This message comes from Indiana University. Indiana University is committed to moving the world forward, working to tackle some of society's biggest challenges. Nine campuses, one purpose. Creating tomorrow, today. More at iu.edu. Making things 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. 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. 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. Right now we're building a five-inch speaker. Dan Diggory 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, drive-thrus, even airplanes. Misco was a storefront business started by Diggory's parents after World War II. Four years ago, Diggory moved the company into a spacious,

new facility that now employs nearly 100 people. We're very committed to American manufacturing loudspeakers. So we built this big facility with a big factory floor. Diggory takes me out to the factory floor that produces 2,000 to 3,000 speakers a day. But he says they could be making more. This is where I would like to build more production lines. He points to a large area of the factory floor sitting empty. 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. That's because Misko imports a lot of its parts from China. And Diggory, 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. 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. The 25% tariff on all these little parts adds up. But the strange thing is when Diggory imports a speaker fully made in China, he only faces a 7.5% tariff.

In many cases, what that meant is that more of our product is being built in China now than before the tariffs. Consider this. The tariffs imposed by the Trump administration were intended to boost American manufacturing. But instead of making more products in America, some manufacturers like Diggory are making fewer things in America. From NPR, I'm Asma Khalid. It's Sunday, June 18th. It's Consider This from NPR. When Trump first launched this trade war with China, it was a shock to the economic system. The theft of American jobs and wealth has come to an end.

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. Who said Trump's idea is a good one? Some feel that. 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.

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. So this is the frame of the speaker. We sometimes call it a basket. Dan Diggory is proud to make things in America,

but he says he can't buy every single part here. And here's the thing. The current administration agrees the tariffs were put on hastily. We shouldn't penalize a company that wants to build their product in America. I think that the tariffs were hastily and unstrategically imposed. And here's the thing. The current administration agrees the tariffs were put on hastily. I think it is important to distinguish between the reason why the tariffs were imposed from how the tariffs were imposed. That's Catherine Tai. She's the Biden administration's top trade official.

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. But the Biden White House is clear there are legitimate reasons for these China tariffs, like the course of practice of forcing American companies to hand over their tech in exchange for the right to do business in China. 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. 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 attacks 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 Ty, why not look at the tariffs in a more strategic way? 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. What is the distinction that you see between how you and the previous administration relate to China in the context of the tariffs. What we do share is a diagnosis that the U.S.-China trade relationship is out of balance. I think that there are a lot of significant distinctions between our approaches.

They have literally done nothing but follow our policy. That last voice is Bob Lighthizer. He was Trump's top trade official. They haven't put any new tariffs on. They have done nothing but follow our policy. Yet they criticize the way we arrived at the policy. Still, it's not clear anyone but Trump would have dared to take the first step. 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. 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. My name is Greg Prey. I'm the president and CEO of Columbia Forest Products. We make hardwood, plywood, and veneer that ends up in cabinets and kitchens. Back in 2017, the Commerce Department found that China was dumping plywood into the U.S., selling it at unfairly low prices. The U.S. manufacturers can compete if we're competing fairly, but we cannot compete if it's an unfair playing field. He says Trump's tariffs showed the U.S. government had their back. There was no criticism in our industry. In fact, there were cheers.

And there were other tariffs on plywood, too. Prey says Chinese companies did change their behavior after all of this, but not necessarily for the better. They immediately tried to circumvent it by moving their products, even some of their manufacturing, to other countries such as Vietnam and Indonesia. 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 Degree says he's also turned to Vietnam. Vietnam is developing a loudspeaker industry. It's developing part suppliers, but it's very new. You know, these supply chains just don't

move on a dime, right? 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 percent tariff for parts from China, but only a 7.5 percent tariff on a fully made Chinese speaker. So he is now an American manufacturer, making a majority of his speakers in China. 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. Diggory says he can pass on some of his additional costs 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.

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. 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. Five or six years ago, the conversation was about costs and about whether the Chinese system was playing by the rules. That's Chad Bowne. He's with the Peterson Institute for International Economics.

The conversation has shifted entirely. 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. 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, Catherine Tai, what's going on with this review? 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? 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 Diggory, he's not optimistic about change. It's all about what should I say, what should I do to get me reelected. And you think removing some of these tariffs is not politically popular? You know, I hate to say this, but it would just get portrayed as being weak on China. 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 frontrunner. It's Consider This from NPR. I'm Asma Khalid.

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