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How Companies Dodge Tariffs

·1 min

No matter who wins the White House and control of Congress this autumn, one aspect of trade policy is likely to endure: Washington’s tough-on-China protectionist stance. But several trade experts predict that the America-first model of slapping tariffs on adversaries will backfire. Critics of tariffs and export restrictions say they not only will potentially exacerbate inflation and drag down economic growth, but are also likely to fail for a simpler reason: Chinese companies may find ways to beat them. Huawei has shown that companies can find workarounds. Last year, the Chinese telecom giant unveiled a smartphone powered by a high-end semiconductor, despite efforts by the Biden administration to prevent such technology from reaching China. Huawei’s ability to acquire the banned materials it needed was attributed to a web of gray channels. ‘America’s flimsy controls’ of those suppliers facilitated this, according to a research report. A similar approach could work for electric vehicles. Among the increased tariffs on Chinese-made goods announced by Biden this week, electric vehicles were a major focus. The levies jumped to 100 percent from 25 percent.