As the Biden regime looks to tame rampant inflation in the runup to the 2022 midterms, one option that is being discussed is eliminating Trump-era tariffs on Chinese goods. The hope being it will lower the costs of various imported items and the reductions in prices will lower the financial pressures the public is feeling due to inflation.
On Monday, Secretary of the Treasury Janet Yellen met with Vice Premier of the People’s Republic of China Liu He. They discussed supply chain disruptions and high commodity prices, but they also discussed the possibility of rolling back the Trump tariffs.
Not all economists think such a policy will have any effect on inflation, however. China Beige Book Chief Economist Derek Scissors is one economist who thinks such a policy will have no effect at all.
In an interview, he said, “We have a narrow proposal that will probably come from the Biden Administration. It’s not going to have any effect on inflation.”
He went on to point out that the main precursors which drive inflation, like gas, food, and lodgings, which had the highest price hikes in May’s Consumer Price Index (CPI) report, have no relation to China. Therefore lowering Chinese tariffs would have no effect on their prices. Farmers, for example will see no benefit from removing the tariffs.
Scissors notes, “What the farmers probably want is a better U.S./China relationship so they feel better about exports. That’s certainly what a lot of the business community wants.”
In addition, he points out that if you look at the goods which would have the tariffs removed from them, they account for only a small percentage of total consumption in the US.
Scissors explained, “They’re a small part of U.S. consumption. U.S. consumption is 50 times that large.”
The tariffs being looked at were imposed by the Trump regime in 2018, as part of a broader trade war. After President Trump struck the Phase One agreement and it was implemented in January of 2022, tariff rates their application remained steady. The tariffs are about 19.3%, and they apply to about 66% of Chinese imports into the U.S., according to the Peterson Institute for International Economics (PIIE).
According to Scissors, the only real answer to inflation is to strengthen the dollar, such as is being done by the Federal Reserve through interest rate hikes.
He notes, “A stronger dollar reduces the cost of all imports, and that would be a more powerful tool,”
