What are Some Ways to Reduce the Trade Deficit

By Michele Nash-Hoff

The trade deficit for 2021 with China grew 14.5% for the full year to $355.3 billion, as imports increased sharply because businesses were restocking shelves to meet robust domestic demand. This increased the decline that followed then-President Donald Trump's policies aimed at reducing the deficit with tariffs and purchase targets.

Reuters reported that “The sharp widening in the trade gap reported by the Commerce Department on Tuesday mostly reflected a shift in spending toward goods from services during the COVID-19 pandemic. With businesses eager to rebuild depleted inventories against the backdrop of stretched global supply chains, the deficit is unlikely to shrink much this year, cutting into economic growth.”

The New York Times commented, “Americans, sheltering at home from the coronavirus and many with savings swelled by government relief packages, slashed their spending on travel, restaurants and movies and splurged on furniture, electronics, food and other goods instead. The trade deficit numbers are also the latest sign of how dependent the United States remains on other countries, particularly China, for the things that consumers want to buy.”

If consumers had the ability to determine the County of Origin for their online purchases and choose to buy Made in USA, this would help reduce the trade deficit with China.  Unfortunately, S. 3707, the COOL Online Act, introduced in the 116th Congress (2019-2020) by Sen. Tammy Baldwin (D-WI) and co-sponsored by Sen. Rick Scott (R-FL), Sen. Christopher Murphy ([D-CT0, and Sen. Kelly Loeffler ([R-GA) didn’t get out of committee to be voted on by the Senate. It hoped that this bill will be reintroduced into the Senate and a companion bill will be introduced in the house this year. 

We could also reduce the deficit if Federal procurement agencies focused on buying goods from American suppliers in compliance with the Buy American Act of 1933, which states “The Buy American Act applies to all U.S. federal government agency purchases of goods (articles, materials, or supplies) valued over the U.S. micro-purchase threshold (currently set at US$10,000). When purchased by federal entities for public use, the Act requires that these goods be produced in the U.S.”

However, on January 29, 2022, The Epoch Times article, “Chinese-Made COVID-19 Test Kits Are Coming to Millions of US Households via White House Initiative” reported that “As the White House’s free at-home COVID-19 test kits are reaching millions of U.S. households, the “made in China” label on some of those kits is stirring concerns.” This distribution is being done due to the “Biden administration initiative to give away 1 billion self-test kits to Americans for free. A sizable portion of these kits will be sourced from iHealth Labs, a California subsidiary of Chinese medical gear manufacturer Andon Health.”

The article explained that “Since December 2021, the company has won contracts worth more than $2.1 billion with the U.S. federal government and some state governments, according to Andon’s filings and federal contract records.”

The Epoch Times stated that Andon was “Established in 1995 in the Chinese megacity of Tianjin” and “had been known as a producer of blood pressure monitors…Andon owns a 70 percent stake in iHealth Labs, which was founded in 2010, the year that Andon went public in Shenzhen, China. Chinese smartphone maker Xiaomi, which invested $25 million in iHealth in 2014, holds 20 percent ownership in the company.”

It is outrageous that “Roughly $1.8 billion of the amount for the White House rollout came from the Department of Defense (DOD). The department awarded two contracts to the lab on Jan. 13 and Jan. 26, respectively, which would bring more than 354 million Chinese-made kits—or about a third of the total—to U.S. homes.”

Most importantly, the deficit would have been lower if China had complied with the U.S.-China trade agreement signed in 2020. On February 8, 2022, Chad P. Brown  of the Peterson Institute of International Economics (PIIE) wrote:  “Two years ago, President Donald Trump signed what he called a "historical trade deal" with China that committed China to purchase $200 billion of additional US exports before December 31, 2021. Today the only undisputed "historical" aspect of that agreement is its failure…In the end, China bought only 57 percent of the US exports it had committed to purchase under the agreement, not even enough to reach its import levels from before the trade war. Put differently, China bought none of the additional $200 billion of exports Trump's deal had promised.”

As a result of the violation of this trade agreement, on February 10, 2022, the Coalition for a Prosperous America (CPA) “called on the Biden administration to fully implement all tariffs the U.S. government imposed on China pursuant to Section 301 of the 1974 Trade Act in light of China’s violation of the Phase One deal. As part of this enforceable agreement, China pledged to increase its purchases of U.S. agricultural, manufactured, and energy goods. However, China was more than one-third short of its pledges—purchasing just 63 percent of what was promised under the Phase One deal. In exchange for China’s commitments under the Phase One deal, the United States agreed to lower or suspend implementation of the final tranche of Section 301 tariffs in December 2019, known formally as Lists 4A and 4B. “


The press release stated that “Last October, U.S. Trade Representative (USTR) Katherine Tai announced that China violated the Phase One deal. This week, U.S. Secretary of Commerce Gina Raimondo said that the Biden administration would hold China accountable for failing to meet its commitments under the Phase One deal.


CPA made the following statement: “CPA strongly believes the Biden administration should immediately and fully impose all 301 tariffs to hold China accountable for, once again, violating an international agreement,” said Zach Mottl, Chairman of CPA. “For decades, China has engaged in massive state-subsidization of its industries, stolen Intellectual Property, used forced labor, shown little regard for environmental laws, and consistently violated international agreements. The goals of the Phase One deal required structural reforms and other changes to China’s economic and trade regime, however it is now clear that China has no interest in complying. Now that the Biden administration has confirmed China is violating the agreement, the 301 tariffs for products covered under Lists 4A and 4B should snap back to their original levels.”


According to the Congressional Research Service, Section 301 tariffs of the Trade Act of 1974 began to be imposed in 2018 after an investigation by the U. S. Trade Representative into several allegedly unreasonable or discriminatory trade practices carried out by China.  These tariffs were imposed in four stages and divided into lists of various categories of goods. Lists 1, 2, and 3, were imposed between June 2018 and May 2019. List 4 tariffs were supposed to go into effect on December 15, 2019, but the planned implementation was suspended as part of the Phase One deal with China.


“CPA is calling on USTR to take the necessary actions to impose the List 4B tariffs and raise the List 4A tariffs to the originally planned level of 15 percent.”

In my opinion, across the board tariffs of 15-25% should be imposed on all imports from China as China has never lived up to the principles and terms of being a member of the World Trade Organization.  Every year, the annual U.S.-China Trade Commission has documented egregious violations on the part of China with regard to being a member of the World Trade Organization and enjoying the privileges of Most Favored Nation Aka Permanent Trade Partner granted by President Clinton in September 1999. No action to address China’s violation of WTO terms was taken by any subsequent administration until the imposition of Section 301 tariffs by the Trump Administration in 2018.


American manufacturers are competing on an unfair playing field in the global marketplace and even on their own turf of the domestic market.  China’s mostly state-owned enterprises are engaging in product dumping, selling below cost to take over market share of specific industries, and receiving generous subsidies and credit from the Chinese government.  Now is the time to protect American manufacturers against these predatory practices of China.  We cannot allow China to achieve their plan of becoming the world’s superpower if we want to remain a free, independent country.