2 Years Since Trade Deal with China, Tariffs Aren't Working for American Businesses The deal was supposed to be a boon to American business and industry as China stepped up its purchases of U.S.-made goods. Two years on, the reality looks different.

By Dan Digre

Opinions expressed by Entrepreneur contributors are their own.

Yaorusheng | Getty Images

The start of 2022 marked an important anniversary for the U.S. relationship with China, with two years having passed since the Trump administration's signature Phase One Trade Deal. At the time, former President Donald Trump called it a "momentous step" that would lead toward a "future of fair and reciprocal trade." The deal, it was claimed, would be a boon to American business and industry as China stepped up its purchases of U.S.-made goods.

Two years on, however, the reality looks different.

In fact, data from the Peterson Institute for International Economics shows that since the trade deal took effect, China has fallen notably short of its purchasing commitments in key sectors like manufacturing, agriculture and energy. This was reinforced when Deputy U.S. Trade Representative Sarah Bianchi recently acknowledged it is "clear" China has failed to live up to its commitments.

Given that China has fallen so far short of its commitments under the Phase One Deal, it's important for us to turn our attention to another notable milestone: the four-year anniversary of the trade war with China.

Related: This Is Why Small-Business Owners Are the Unintended Victims of the U.S.-China Trade War

How tariffs impact U.S. business owners

When the previous administration first put the tariffs in place — notably with no dissent and even with support from many in the Democratic party — it claimed that they would give the U.S. leverage in its negotiations with China, insisting that China would be ultimately responsible for paying the cost of the tariffs. However, that simply isn't true, no matter how many times some have claimed it is. The tariffs haven't been an effective way to hold China accountable; they've been an incredible burden on our economy.

Tariffs are taxes that U.S. businesses pay to the government for importing goods from overseas. They aren't paid by China; they are taxes on business owners right here in the U.S., who have been cutting massive checks to U.S. Customs and Border Protection (CBP) to import the things we need to stay in business rather than invest those funds in growth and expansion to provide jobs for our communities. The total cost to date is a staggering $123 billion and counting, paid almost entirely by U.S. businesses.

Even worse is that the tariffs, if anything, make it more difficult to manufacture products in the U.S. For example, when I import the parts I use to manufacture my business's products in the U.S., those parts are subject to a considerable 25% tariff rate. If I instead manufacture the entire product in China and then import the finished product, it is subject to just a 7.5% tariff rate. It's clear that the tariffs disincentivize domestic production of products and make U.S. production less competitive. As the CEO of a company that has manufactured its products in the U.S. for over 70 years, this is not the direction I want to see.

Related: 5 Ways to Limit the Damage to Your Business From Trump's Tariffs

It's time to apply the lessons learned

Simply put, these tariffs were hastily done with little strategy or guidance from the beginning and have been a massive and unnecessary penalty on American businesses and consumers ever since. If we want America to be able to compete on a global scale, then it doesn't make sense to hit businesses with a 25% tax on materials they need before they even get started. It undermines our ability to compete with companies abroad and weakens our economy as a result.

This year, President Joe Biden and United States Trade Representative Katherine Tai need to do everything they can to ensure the trade war finally ends before hitting its fifth anniversary. The tariffs have proven to be ineffective in leveraging China to live up to its end of the Phase One deal and have only hurt American businesses and consumers. It is time for the current administration to apply the lessons learned from the trade war, not carry on as it has been and ignore them.

Related: China Is a Problem, But Higher Tariffs Are Not the Solution

Wavy Line
Dan Digre

Entrepreneur Leadership Network VIP

President and CEO of MISCO Speakers

Dan Digre, president and CEO of MISCO Speakers, has dedicated more than 40 years to the loudspeaker industry working with MISCO and is a past president of ALMA International, the loudspeaker industry’s association.

Editor's Pick

A Father Decided to Change When He Was in Prison on His Son's Birthday. Now His Nonprofit Helps Formerly Incarcerated Applicants Land 6-Figure Jobs.
A Teen Turned His Roblox Side Hustle Into a Multimillion-Dollar Company — Now He's Working With Karlie Kloss and Elton John
3 Mundane Tasks You Should Automate to Save Your Brain for the Big Stuff
The Next Time Someone Intimidates You, Here's What You Should Do
5 Ways to Manage Your Mental Health and Regulate Your Nervous System for Sustainable Success

Related Topics

Business News

Google Wants Employees Back in the Office, Considering 'Attendance' in Performance Reviews

In an email, a Google executive reportedly told employees that many new features and products unveiled during Google's developer conference last month were "conceived, developed, and built by teams working side by side."

Business Models

What New Aviation Practices Can Teach Us About Collaboration and Innovation

By identifying niche markets, embracing technological advancements and fostering collaboration, entrepreneurs are changing the aviation industry.

Business News

'I Am Just Floored': Woman Discovers She Won $1 Million Lottery Prize While Checking Her Email at Work

Initially, she thought the email was a scam, but went to lottery headquarters and walked away with a six-figure check after taxes.

Growing a Business

14 Easy Ways to Rank Your Website Higher on Google

Despite Google's algorithm and regular updates, you can quickly boost your website's ranking with these tips.

Business News

'I've Got the Bug for Business': See All of Mark Wahlberg's Entrepreneurial Endeavors, From Marky Mark and the Funky Bunch to Wahlburgers

Mark Wahlberg owns businesses in several categories, including entertainment production, apparel, fitness, and nutrition.

Business News

After Being Told They Could Work From Home Forever, Employees Made Major Life Changes. Then, a New CEO Ordered Them Back to the Office.

Farmers Group CEO Raul Vargas is facing backlash for the change, but he says being in the office brings more "collaboration" and "innovation."