Taxes should be specific: US-China Trade issues

When you look at what China imports, a lot of the cheap goods they import are actually inferior goods.  And many of those are just that, and in fact some are getting to be too inferior, as seen by the rising levels of product recalls from China.  The point of this is that there is a high but very elastic demand for these goods because of the recession.  As the US economy improves, many will be happy to abandon these goods and that sector of the market will shrink rapidly.  The deadweight loss in this case would be too high to justify anything beyond minimal taxes, and the overall market for Chinese imports will shrink without inferior goods.  Until that time, the goods are being bought and sold through US distributers and this creates US jobs (in retail etc), which are important in the current economy.  Chinese currency manipulation is another component that makes the cheap inferior goods possible.  Floating the currency would at this point very detrimental to the elastic market and have a negative impact.  Therefore regulations should be minimal for the elastic imports market during the recession so that the trade of these items continues to fuel economic growth. (See Pro-currency manipulation arguements in regard to economic growth.)

There is, however, an inelastic market for normal goods made in China.  Indeed, as Sara Bongiorni found out in "A Year Without Made In China", it is nearly impossible to avoid consuming Chinese imports.  For these imports, the deadweight loss will be lower and a higher tax can be implemented without a large impact on the economy.  Regulations and restrictions could help, especially those that aim to level the playing field- China has regulations in place against imports from the US, for example (see Economics Help, and 247WallSt).  The overall goal would be to force the end of currency manipulation over the next few years as the US economy improves and to strengthen the presence of US goods in China.  Floating the currency has the advantage of raising the prosperity of Chinese citizens, which would give them more income with which to purchase US goods.