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Biden Tackles Tariffs: Searching for a Magic Formula Against Inflation

Biden Tackles Tariffs: Searching for a Magic Formula Against Inflation

Status: 06.07.2022 10:24 am

US President Biden is under pressure due to high inflation. It now appears that his government may ease punitive tariffs on Chinese imports to reduce costs and prices. But it is controversial.

By Steffen Rudd, ARD Studio Washington

Spring 2018: Then-US President Donald Trump announced special tariffs on Chinese imports in Washington. It was a long-overdue move against the People’s Republic of China’s unfair trade practices, which Trump justified. Tariffs on $50 billion worth of Chinese goods will make America stronger and richer.

In the months that followed, his government expanded China’s tariffs to cover more than $350 billion worth of imports. The Chinese side reacted with corresponding counter-charges. Trump’s successor, Joe Biden, maintained special tariffs on Chinese goods. Outspoken criticism of the Chinese government’s actions — including in the area of ​​economic policy — is one of the few things on which Democrats and Republicans in the United States agree. But high inflation in the US may now bring some movement on the tariff issue.

Import duties increase consumer prices

The inflation rate was last 8.6 percent year-on-year. This puts the Biden administration under pressure, four months before the US general election. “We all know China is engaging in unfair trade practices and we have to do something about it,” US Treasury Secretary Janet Yellen told ABC in mid-June. But tariffs on Chinese imports, which the Biden administration inherited from Donald Trump’s predecessor, make life more expensive for consumers and serve no strategic purpose, Yellen acknowledged. Therefore, consideration is being given to redesigning some of China’s tariffs to make them more sensible and reduce unnecessary burdens on consumers.

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In other words, the Treasury Secretary wants to lower tariffs on Chinese imports to curb inflation in the US and stimulate global trade. On Monday, Yellen spoke via video link with China’s Vice Premier Liu He. Experts have already interpreted this as a sign that something is indeed moving.

Criticism of possible reduction in fees

However, the issue is not uncontroversial within the US government. Catherine Doi, Biden’s trade representative, told a recent Senate hearing that an important lever against China should not be avoided when it comes to trade negotiations.

The clearest criticism of the tariff cut comes from the opposition. “Cutting China’s tariffs would be a political gimmick that would have no impact on consumer prices,” Republican Congressman Kevin Brady told CNBC.

On the other hand, Biden apparently believes that lower tariffs on Chinese imports are good for the US economy. The “Wall Street Journal” speculates that the US president will announce a reduction in special tariffs in the next few days. Economists are already tempering expectations. Analysts at Barclays Bank estimate that China’s tariff cuts would reduce the inflation rate in the United States by at most one-tenth of a percentage point.