Ending PNTR for China Would Leave 'Lasting Scar' on US Economy, Auto Sector, Study Says
Eliminating permanent normal trade relations (PNTR) with China would “leave a lasting scar” on the U.S. economy, costing each U.S. household $11,000 in real income over the period 2024 to 2028 and reducing competition and efficiency over the long term, according to a report released by the U.S.-China Business Council on Nov. 9.
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The increase to Column 2 tariffs would cause overall average U.S. tariffs on China to rise from 19% to 61%, costing up to 744,000 U.S. jobs by 2025 and “significantly” raising prices in the U.S., said the report, written by Oxford Economics but commissioned by the USCBC. The report includes the expiration of Section 301 exclusions when estimating the impact of eliminating PNTR.
Sen. Josh Hawley, R-Mo., has introduced legislation that would end PNTR (see 2303270067), as has Rep. Jim Banks, R-Ind., (see 2308090015), but those bills have gained no traction. The administration repeatedly says it wants to curtail dependence on Chinese imports in strategic areas, but doesn't seek a severing of the commercial relationship.
Not all industries would be equally affected, the report said. Those facing the worst effects would be heavy manufacturing and transport manufacturing, including the automotive sector. “This reflects a combination of high tariffs on US imports from China and significant import dependence on Chinese intermediate inputs, which cannot be easily or cost-efficiently sourced elsewhere,” the report said.
“The resulting combination of rising input costs and high domestic production costs would make it difficult for these firms to remain globally or even domestically competitive and thus encourages resources to re-allocate to other, more cost-efficient sectors.”
The tariffs also likely would prompt China to retaliate, the report said. China’s return to pre-WTO tariff levels would cause its tariffs on U.S. goods to rise from 21% to about 38%, the report said. If that happens, the U.S. wood paper products, wood products and motor vehicles sectors would face substantially higher tariffs, and would “consequently lose a significant part of their international sales as those products become uncompetitive in the Chinese market,” the report said.
Chinese retaliation also would negatively affect agriculture, the report said. “The negative impact on agriculture doubles in 2025 and continues to build thereafter, as removing much of Chinese demand for US agricultural products increasingly weighs on production. Agricultural exports to China are estimated to fall 32%” if China retaliates, compared to just 8% if only the U.S. increases tariffs, the report said.