Cut Trump-era tariffs to curb prices, expert says

WASHINGTON－The United States should eliminate or at least reduce additional tariffs on Chinese imports imposed during the presidency of Donald Trump, says a US trade expert who sees such moves as vital to help combat inflation.

"We're running a red-hot economy. … So anything you can do to reduce that cycle is good news," Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said in an interview with Xinhua News Agency.

In research published on the institute's website, Hufbauer and his colleagues Megan Hogan and Yilin Wang argue that "a feasible trade liberalization package" could deliver a one-time reduction in consumer price index inflation of around 1.3 percentage points. That would save $797 for every US household.

He said the direct effect of eliminating additional tariffs on Chinese products would be a 0.3 percentage point reduction in the CPI, with indirect effects adding "substantially" to the outcome.

"It would be a pretty big signal to US firms that they are going to face more competition and that might cause them to moderate their price increases as inflation rolls forward," the trade expert said.

"We're in a world now where inflation expectations are really quite high," said Hufbauer, noting that the US Federal Reserve's flagged interest rate rises would have some effect on inflation expectations, and trade liberalization measures "would have an additional effect".

According to the US Labor Department, the CPI in March surged 8.5 percent from a year earlier, the largest 12-month increase since the year to December 1981. That followed a 7.9 percent year-on-year gain in February.

Indexes of personal consumption expenditure, the Federal Reserve's preferred inflation measure, soared 6.6 percent in March over the past year, the Commerce Department reported on Friday.

In response to the argument that reducing the China tariffs would not lead to a meaningful reduction in prices, Hufbauer said: "It's better than doing nothing."

He added: "So there's raising interest rates, there's cutting back federal spending, there's reducing tariffs－all of those things have some impact. I would say it's something where every little bit counts."

Of the political climate, Hufbauer said he thinks it will be difficult for the administration of US President Joe Biden to reduce or eliminate additional tariffs on Chinese imports before the midterm congressional elections in November.

But he said he is "very encouraged" by a recent statement by Deputy National Security Adviser Daleep Singh, who said the Biden administration could lower tariffs on nonstrategic Chinese goods such as bicycles or apparel to help curb inflation.

Hufbauer noted that the administration could be reluctant to remove the Trump-era tariffs, because it would have to face criticism for being "soft" on China. "I think they're worried about that, and that prevents them from doing the right thing, the right thing for the US economy," he said.

But Hufbauer thinks the House of Representatives and the Senate might be able to reach an agreement on the America COMPETES Act, which could include billions of dollars funding for the semiconductor industry and expanded tariff exclusion for Chinese products.

Noting the disagreements between the House and the Senate, Hufbauer said he thinks lawmakers could iron out these difficulties by July, as semiconductor firms are "lobbying like crazy" to get the money.

Xinhua