As soon as this week, President Joe Biden may announce the removal of some of the tariffs that former President Donald Trump imposed on China at the start of a trade war in 2018. The move will enable the administration to claim that it acts to the effect of inflation on US consumers, though the impact may be quite small.
Reports in the Wall Street Journal and Bloomberg over the weekend of July 4 suggested that the administration continue to discuss the issue internally. It is expected that tariffs on some goods, unrelated to national security, will be lifted immediately, and that the administration will restart a process enabling businesses to petition for “exclusions” for certain goods, which tariffs on a case further uplift. -per-case basis.
Politico reported Monday that the administration is considering lifting about $ 10 billion in tariffs immediately. If correct, it would represent a very small fraction of the $ 370 billion in tariffs imposed on Chinese goods during the Trump administration.
A long process
The Biden administration has been under pressure from the business community to address tariffs, which in practice function as a tax on U.S. consumers, since its appointment in early 2021.
In a number of public statements, dating back to September of last year, the administration indicated a willingness to at least consider revising the rates, but advocates have so far waited in vain for a concrete proposal.
Treasury Secretary Janet Yellen testified before Congress last month: “This administration has inherited a set of … tariffs imposed by the Trump administration that I think are not really designed to serve our strategic interests. not.”
Yellen added: “We are looking at it and looking to reconfigure those rates in a way that would be more strategic.”
According to a release from the Treasury Department, Yellen and Chinese Deputy Prime Minister Liu He discussed rates during a video conference on Tuesday. Foreign Minister Antony Blinken is expected to meet with Chinese Foreign Minister Wang Yi on Saturday during a trip to Asia, and sanctions could also be on the agenda there.
Biden and Chinese President Xi Jinping are expected to speak later this month.
In an analysis published in March, the Peterson Institute for International Economics studied the impact that the complete elimination of tariffs imposed by the Trump administration during the trade war would have. It concluded that the country would experience a one-off drop in inflation of around 1.3%.
“While a 1.3 percentage point haircut may seem small when inflation rages at more than 7 percent, the relief is not trivial,” the report found. The annual savings for the average American household would be $ 797 per year.
However, experts said there was no reason to expect the elimination of tariffs on only $ 10 billion in Chinese goods would significantly curb inflation.
“Will it have a big impact? I think the answer is no, not in the short term, ”William Reinsch, the Scholl Chair in International Affairs at the Center for Strategic and International Studies, told VOA. “If they come up with tax cuts in the $ 10 billion range, which is rumored, it’s not much.”
“No matter what he does, both sides will be unhappy,” Reinsch said. “Business will say it’s too little, and labor will say it’s too much. But if it’s just $ 10 billion, I think business probably has the better argument. “
“If you make just $ 10 billion out of $ 300 billion, you look at a small fraction of it at best ($ 797 savings for households),” says Scott Lincicome, director of general economics and commerce at the Cato Institute. “And, frankly, by the time that happens, especially given that all the other rates remain in place, the inflationary impact could be zero.”
Lincicome added, “It seems that what’s really going on here is that it’s an attempt to get the administration’s critics off their backs, when it’s not really doing much to the tariffs themselves. Because again, $ 10 billion out of $ 300 billion is not really going to … move the needle. ”
The Biden administration is also considering announcing a new investigation into China’s trade practices under Article 301 of the Trade Act 1974.
Trump used his authority under Article 301 to launch an investigation in 2017, which concluded that China was engaging in unfair trade practices and that eventually led to the imposition of tariffs in 2018.
Should a new investigation be launched, the administration will have one year to complete it. The new investigation could significantly affect the way China responds to any short-term tariff reduction.
“The response of Chinese exports to any rollback in US tariffs is highly uncertain,” Chad Bown, a senior fellow at the Peterson Institute for International Economics, said in an email exchange with VOA. “It will probably depend on the size of the US tariff reduction, what type of products — e.g. consumer goods versus intermediate inputs — the president opts for tariff reductions, and how long exporters expect the new tariff to remain in effect.
“For example, for products that can be placed in stock, there could be a major export reaction if there is an expectation that tariffs could rise again, say as a result of a possible new Section 301 investigation,” Bown said.