But with his advisers divided, potential economic gains limited, and the looming danger of a GOP attack on “softness on China,” Biden doesn’t believe it.
the necessity of doing something inflation Clear. Consumer prices in April were 8.3% higher than a year ago and near their highest level in 40 years, and voters routinely cite rising prices as one of their most annoying things in an election year.
As inflation threatens Democrats’ prospects in November’s congressional elections, Biden said this month he was watching changes to the 25 percent tariff on about two-thirds of U.S. imports from China, or about $335 billion a year. .
While Trump’s first China tariffs minimized the impact on consumers by targeting industrial products, the tariffs eventually expanded to household items including AirPods, refrigerators, TVs, clothing and toys. Now, U.S. companies, which have opposed tariffs from the start, want to use inflation scare to win them.
“During a time of high inflation, reducing the tariff burden on Americans is a no-brainer,” said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce. “Hopefully they can do something, but they can go. Is it far enough? It’s a billion-dollar question.”
However, even removing all tariffs on Chinese goods – which no one expected – would only have a modest impact on prices ahead of the midterm elections. a study Peterson Institute for International Economics economists Gary Hufbauer, Megan Hogan and Yilin Wang concluded that lower import prices due to the end of tariffs would reduce the consumer price index (CPI) inflation measure by 0.3 percentage points.
8.3% if such tariff cuts take effect in April inflation Instead, the tax rate should be 8%.
independent Peterson Research Cardi Ruth, an economist at the University of California, Davis, who served in the Obama White House, found a similar effect, which she described as “a small, short-lived effect on headline inflation.”
Hufbauer said that would have the added benefit of lower prices for domestic goods that compete with Chinese imports, bringing the overall reduction in inflation to about 1 percentage point. But he said that could take nine to 15 months to achieve.
“In other words, the full benefit will not be felt until the November election,” Huffbauer wrote by email.
Even these estimates are optimistic, as they assume all tariffs on more than 10,000 Chinese goods are removed, while Biden is likely to keep most of the existing trade taxes.
At least two options are under consideration, according to business executives who spoke on the condition of anonymity to discuss the confidential deliberations. The president could make it easier for importers to get exemptions from import duties. Or he could lower tariffs on certain Chinese products while launching new investigations into China’s trade practices, which could lead to new tariffs on high-tech products or those improperly subsidized by Beijing.
For Biden, there are few easy solutions to inflation. Many economists say his liberal spending response to the pandemic in 2021 is part of the reason for today’s surge in prices. But it’s too late to do anything now.chronic supply chain Problems and product shortages are the main inflation drivers, bucking the Fed’s forecast for an imminent improvement over the past year.
As a result, the debate within the administration has turned to cutting tariffs, which many economists support in principle, even if its immediate benefits may disappoint.
On the one hand, Chinese products are not a major contributor to inflation.
Gasoline prices are up 44% from a year ago, according to Bureau of Labor Statistics. Used cars are nearly 23% more expensive. Food cooked at home increased by nearly 11%.
Import cost in ChinaHowever, the 4.6% increase over the past 12 months is well below the overall increase in the cost of living.
That doesn’t mean removing the tariffs – with the support of unions and some domestic manufacturers – will be easy.
“Tariffs are sticky,” said Craig Allen, chairman of the U.S.-China Business Council. “They’re easy to build up, but really hard to put down.”
Any inflationary gains the president may realize from tariff cuts are not without cost. Before taking action, Biden must adjudicate disagreements among his advisers related to broader questions about the administration’s strategy for dealing with competitive threats from China.
At the G7 finance ministers meeting on Wednesday, the finance ministers Janet L Yellen Agree to amend tariffs on China.
“It seems that they are causing more harm to consumers and businesses, and in the sense of addressing real issues we have with China, whether they involve supply chain breaches, national security concerns or other unfair trade practices, they are not Not very strategic,” she told reporters in Bonn, Germany. “…some of the stress can be relieved by cutting some of them.”
In fact, U.S. importers pay about $142 million a day in Chinese tariffs, according to Steve Lamar, president of the American Apparel and Footwear Association.
Yellen acknowledged there were “various views” within the administration on the tariffs and suggested there would be no immediate decision.
The president’s trade representative, Katherine Tai, was less enthusiastic about potential tariff cuts.middle most recent appearance At the Milken Institute, she derided Hufbauer’s research as “something in between fiction and fun scholarship.”
Like any negotiator, Tai didn’t want to give up bargaining chips without getting something in return. But she also doesn’t want to drop tariffs to address immediate inflation at the expense of the country’s long-term economic environment. Dai argues that tariffs encourage investment in U.S. industries that would be less attractive if they were not protected from unfair Chinese competition.
“We need to make sure that what we’re doing now… doesn’t disrupt the mid-term design and strategy we know we need to pursue,” she told Milken’s audience.
The debate over whether to maintain the tariffs comes at a time when most analysts say they have failed. Trump levied trade charges in 2018 to narrow the huge U.S. trade deficit with China and force China to abandon some unfair trade practices, including forcing U.S. companies to share their technological secrets.
Instead, the deficit with China is expected to be a record. In the first quarter, U.S. imports of Chinese goods exceeded U.S. exports to China by $101 billion, up from $79 billion in the same period in 2017 before the tariffs were imposed.
“They didn’t achieve their goals,” said William Reinsch, a trade expert at the Center for Strategic and International Studies. “China’s actions are not any different than they were back then, and they’ve done a lot of collateral damage.”
But the political cost of cutting tariffs could be high. The AFL-CIO and other Biden-backed unions want them to continue. Republicans are sure to slash tariffs as a sign of Democrats’ softness toward Beijing.
GOP animosity toward China was evident in campaigns in states such as Missouri, Pennsylvania and Ohio. In a Gallup poll in March, 49% of Americans considered China to be the country’s “worst enemy,” up from 45% last year.
“If Biden slashes tariffs, Republicans will slam him,” said Derek Ssisos, a China expert at the American Enterprise Institute. “Despite the tariffs, the U.S. goods trade deficit with China hit a record in the first quarter and could be a record this year. If President Biden cuts tariffs, and we do see a record deficit, it’s for Republicans An opportunity to attract union voters.”