Biden didn’t kill Trump’s tariffs on China to make Chinese imports cheaper

Placeholder while loading article actions

With the stroke of a pen from the White House, President Biden could cut the cost of thousands of consumer and industrial products and strike a blow in the fight against inflation that he calls his “top domestic priority.”

All he has to do is raise the tariffs on imported Chinese products that President Donald Trump has imposed as of 2018.

But with his advisers divided, potential economic gains limited, and the threat of Republican attacks looming for being “soft with China,” Biden is not convinced.

imperative to do something about economic inflation Clear. Consumer prices in April were 8.3 percent higher than they were a year ago, near a 40-year high, and voters routinely cite price hikes as among the top causes for alarm in an election year.

With inflation threatening Democrats’ prospects in November’s congressional elections, Biden said this month he is looking to make changes to 25 percent tariffs that apply to about two-thirds of US imports from China, or roughly $335 billion annually.

While Trump’s first tariffs in China reduced the consumer impact by targeting industrial products, the duties eventually expanded to include household items including AirPods, refrigerators, televisions, clothing and toys. Now, US companies that have opposed tariffs from the start are hoping to capitalize on inflation fears to win their removal.

“It doesn’t make sense to reduce the tariff burden on Americans at a time when inflation is high,” said Myron Brilliant, executive vice president of the US Chamber of Commerce. “I hope they do something, but will they go far enough? That is the billion dollar question.”

Countries move to tackle inflation and increase risks to the global economy

However, even eliminating all tariffs on Chinese goods – which no one expects – will have only a modest impact on prices ahead of the midterm elections. study by economists Gary Hofbauer, Megan Hogan and Wellin Wang of the Peterson Institute for International Economics concluded that lower import prices resulting from the end of tariffs would reduce the consumer price inflation index (CPI) by 0.3 percentage points.

If these tariff cuts take effect in April, 8.3 percent economic inflation Instead, the rate was 8 percent.

Separated Peterson study By economist Cady Ross of the University of California at Davis, who served in the Obama White House, she found a similar effect, which she describes as a “negligible, short-lived effect on overall inflation.”

There will be an additional benefit, Hoffbauer said, as prices of domestic goods that rival Chinese imports have also fallen, bringing the total drop in inflation to about one percentage point. But he said that could take nine to 15 months to materialize.

“In other words, we won’t be feeling the full benefit before the November elections,” Hoffbauer wrote via email.

Even those estimates are optimistic, because they assume all tariffs on more than 10,000 Chinese goods are eliminated, and Biden will likely keep most of the current trade taxes in place.

At least two options are under consideration, according to the businessmen, who spoke on the condition of anonymity to discuss confidential deliberations. The president can make it easier for importers to win exemptions from import duties. Or he could drop tariffs on some Chinese products while launching a new investigation into Chinese trade practices that could lead to new tariffs on high-tech products or those improperly subsidized by Beijing.

For Biden, there are few easy fixes to inflation. Many economists say his response to pandemic free spending in 2021 is partly responsible for the price hikes today. But it’s too late to do anything about it. chronic Suppliers Problems, and product shortages, are the main driver of inflation that defied the Fed’s forecast of an impending improvement last year.

So the debate within the administration has turned to lowering tariffs, which many economists support in principle, even if its immediate benefits are likely to be disappointing.

On the one hand, Chinese products were not among the main contributors to inflation.

Gasoline prices are up 44 percent compared to last year, according to Bureau of Labor Statistics. Used cars cost approximately 23 percent more. The proportion of home-cooked food rose by nearly 11 percent.

The cost of Chinese importsHowever, it has risen by 4.6 percent over the past 12 months, far less than the overall jump in the cost of living.

This does not mean that eliminating tariffs – backed by labor unions and some local manufacturers – will be easy.

More experts say the US may head into a recession next year

Tariffs are firm,” said Craig Allen, president of the US-China Business Council. “It’s easy to put up with and really hard to drop.”

Whatever inflation benefit the president may realize from tariff cuts, it will not be costless. Before he can act, Biden must judge a split among his advisers tied to broader questions about the administration’s strategy to counter the competitive threat from China.

At Wednesday’s meeting of G7 finance ministers, Treasury Secretary Janet L Yellin Approved the adjustment of Chinese tariffs.

“It feels like it’s doing more harm to consumers and businesses and isn’t very strategic in terms of tackling the real problems we have with China, whether it’s supply chain weaknesses, national security issues or other unfair trade practices,” she said. Correspondents in Bonn, Germany. “…some comfort may come from cutting some off.”

In fact, US importers pay roughly $142 million a day in Chinese tariffs, according to Steve Lamar, president of the American Apparel and Footwear Association.

Yellen acknowledged that there was a “variety of opinions” within the administration about the tariffs and indicated that a decision was not imminent.

Catherine Taye, the president’s trade representative, is less enamored with potential tariff cuts. during recent appearance At the Milken Institute, she ridiculed Hoffbauer’s study as “something between imagination and an interesting academic exercise.”

Tunisia is among the countries most affected by the economic repercussions of the war in Ukraine

Like any negotiator, Tai doesn’t want to hand over a bargaining chip without getting something in return. But it also does not want to forgo tariffs to tackle an immediate problem of inflation at the expense of the country’s long-term economic climate. Tai argues that tariffs encourage investment in US industries that may be less attractive if they are not protected against unfair Chinese competition.

“We need to make sure that everything we’re doing now… doesn’t undermine the design and the mid-term strategy that we know we need to pursue,” she told the Milken audience.

The debate over keeping the tariffs comes as most analysts describe it as a failure. Trump imposed trade tariffs in 2018 to reduce the massive US trade deficit with China and to force the Chinese to abandon many unfair trade practices, including forcing American companies to share their technology secrets.

Instead, the deficit with China is on track to set a record. During the first quarter, US imports of Chinese goods exceeded US exports to China by $101 billion, up from $79 billion during the same period in 2017, before tariffs were introduced.

“They haven’t met their goals,” said William Reinsch, a trade specialist at the Center for Strategic and International Studies. “China’s behavior is no different than it was back then, and they caused a lot of collateral damage.”

But the political cost of lowering tariffs could be prohibitive. The AFL-CIO and other labor unions supporting Biden want them to continue. Republicans are sure to veto tariff cuts as a sign of Democrats’ weakness toward Beijing.

Republican hostility toward China was evident during the election campaign in states such as Missouri, Pennsylvania, and Ohio. In a March Gallup poll, 49 percent of Americans identified China as the country’s “biggest enemy,” up from 45 percent last year.

“Republicans will criticize President Biden if he cuts tariffs significantly,” said Derek Sisori, a China expert at the American Enterprise Institute. The US deficit in goods trade with China hit a record for the first quarter, despite tariffs, and could set a record for this year. If President Biden cuts tariffs and we see a record deficit, that gives Republicans a chance to attract union voters.”

Leave a Comment