Critics of tariffs and export restrictions towards China contend that these measures could potentially worsen inflation and economic growth while ultimately proving ineffective. They suggest that although Chinese businesses may face operational slowdowns due to the restrictions, they have been able to navigate around them.
The New York Times highlighted Huawei as a prime example of how companies can find alternative solutions. In a notable instance last year, the Chinese telecommunications giant introduced the Mate 60 smartphone, featuring cutting-edge semiconductor technology that caught Washington by surprise. The chip utilized in the device was precisely the kind of technology that the Biden administration sought to prevent from reaching China.
Douglas Fuller, an Assistant Professor at the University of Copenhagen, pointed out that Huawei's success was not a breach of international trade regulations but rather a result of the company leveraging a network of unofficial channels to acquire prohibited materials necessary for chip production. He emphasized that ambiguous US regulations on these suppliers inadvertently aided Huawei.
A comparable strategy could potentially be effective in the realm of electric vehicles, which have been a primary target of increased tariffs on Chinese products. The New York Times reported that tariffs on electric vehicles have surged from 25% to 100%, prompting analysts to anticipate a rise in production by Chinese electric car manufacturers in Mexico to sidestep import levies imposed by President Joe Biden.
The article also mentioned that proponents of free markets caution against trade barriers due to their potential to create additional issues. Protectionist trade policies are likely to stifle competition, restrict consumer options, drive up prices, and are projected to have negative impacts on economic growth and employment prospects, according to assessments by the American Tax Research Foundation.