Biden Dealing with Tariffs: The Search for a Magical Formula Against Inflation

US President Biden is under pressure due to high inflation. It is now clear that his government can relax punitive tariffs on Chinese imports in order to lower costs and prices. But this is controversial.

Spring 2018: US President Donald Trump announced the imposition of special tariffs on Chinese imports in Washington. It was a long overdue move given the unfair trade practices of the People’s Republic, that Trump justified the move. Tariffs on $50 billion in Chinese goods would make the United States stronger and richer.

In the months that followed, his government expanded China’s tariffs to include more than $350 billion in imported goods. The Chinese side responded with the corresponding customs duties. Trump’s successor, Joe Biden, has maintained special tariffs on Chinese products. Public criticism of the actions of the Chinese government – including in the area of ​​economic policy – is one of the few things that Democrats and Republicans in the United States agree on. But high inflation in the US could now bring some movement to the customs issue.

Import duties increase consumer prices

The inflation rate was last at 8.6 percent on an annual basis. Four months before the US general election, this put the Biden government under pressure. “We all recognize that China is engaging in unfair trade practices that we must do something about,” US Treasury Secretary Janet Yellen told ABC in mid-June. But Yellen acknowledged that tariffs on Chinese imports, which the Biden administration inherited from Donald Trump’s predecessor, make consumers’ lives more expensive and serve no strategic purpose. Therefore some tariffs are being considered in China to make them more reasonable and reduce unnecessary burdens on consumers.

In other words, the Treasury Secretary wants to reduce tariffs on Chinese imports in order to curb inflation in the United States and stimulate global trade. On Monday, Yelin discussed the issue with Chinese Vice Premier Liu He via video link. Experts have already interpreted this as a sign that something is really moving.

Criticism of a possible tariff cut

However, this issue is not in dispute within the US government. Biden’s trade representative, Catherine Taye, said at a recent Senate hearing that tariffs are an important lever against China that should not be skipped when it comes to trade negotiations.

Even the most visible criticism of a possible tariff cut comes from the opposition. “Reducing Chinese tariffs would just be a political gimmick without any impact on consumer prices,” Republican Congressman Kevin Brady told CNBC.

On the other hand, Biden clearly believes that reducing tariffs on Chinese imports will be beneficial to the US economy. The Wall Street Journal speculates that the US President will announce in the next few days that he will cut special tariffs. Economists are already softening expectations. Analysts at Barclays estimate that lower tariffs in China would reduce US inflation by a few tenths of a percentage point at most.