Tariffs put in crosshairs as inflation bites

With inflation running at four-decade highs in the United States, the prospects for the removal of tariffs on Chinese goods have brightened.

Katherine Tai, the US trade representative, said on Monday in an interview at the Milken Institute Global Conference in Los Angeles that "all tools are on the table" to effectively deal with rising inflation.

The Office of the United States Trade Representative, or USTR, issued a notice on Tuesday about a statutory four-year review of the tariffs on Chinese goods, stating that pursuant to a provision of Section 301 of the Trade Act of 1974, the two rounds of tariffs are due to expire on July 6 and Aug 23, unless domestic beneficiaries of the tariffs request an extension.

"There is little doubt that the US shot itself in the foot with its unwise tariff war. It has more or less been a 'lose-lose' proposition for both sides, with the US side－and average Americans－bearing the heavier losses," Sourabh Gupta, a senior fellow at the Institute for China-America Studies, told China Daily.

He also noted that a reduction in tariffs cannot completely relieve inflation.

"And the genie of protectionism that the tariffs have unleashed will be hard to put back in fully. That said, the removal or readjustment downward of the tariffs will only impact the tide of inflation at the margin," Gupta said.

"Yes, it is helpful but only up to a point. The tariffs are just one of many contributory factors to the inflation we see around us and not the most important one."

Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, told China Daily that he expected that the USTR would complete the review within three months and grant exclusions from Section 301 tariffs on around half of US imports from China. He noted that the action's drivers are high inflation plus congressional pressure, especially in the Senate.

In an interview with Bloomberg TV on April 22, US Treasury Secretary Janet Yellen said it was worth considering taking steps to lower US tariffs on Chinese goods for "desirable effects" on inflation.

Daleep Singh, deputy national security adviser, suggested on April 21 that some consumer products such as "bicycles or apparel or underwear" could be excluded from the tariffs. Singh was speaking at an event hosted by the Bretton Woods Committee.

In January, a bipartisan group of 141 US lawmakers wrote to Tai calling on her to revive and expand the tariff-exclusion process on Chinese products to mitigate the harm to US manufacturers.

Positive signal

As for the likelihood of the administration of President Joe Biden signaling possible relief from the tariffs on China, Douglas Barry, the vice-president of communications and publications at the US-China Business Council, told China Daily that his organization, with more than 200 US companies doing business in China, believes the tariffs have long been an economic drag.

"The USCBC wants the tariffs dropped and notes that doing so was a President Biden campaign pledge and recommended at the time by the Democratic Party," Barry said.

"In addition, there is bipartisan support in Congress for binning them. They have in the past two years and now serve no legitimate public policy goal."

He said the odds for action on tariff reduction by the administration seem good.

"But we must seize the moment by reopening talks between government leaders to address long-standing market-access issues, which, if resolved, will benefit the bilateral relationship," Barry added.

In a recent policy brief by the Peterson Institute, titled "For Inflation Relief, the United States Should Look to Trade Liberalization", Hufbauer and his colleagues said that trade liberalization measures such as tariff reductions could help address inflation.

Hufbauer also said that removing the tariffs on Chinese products "should be long term".