Desperate times, desperate measures.
The Biden administration may soon announce targeted rollbacks of some US tariffs on Chinese goods as part of an increasingly desperate effort to curb inflation ahead of the midterm elections. A decision could come as early as this week, according to multiple media outlets.
The optics leave something to be desired. You could argue the tariffs were capricious and ineffective in the first place — the cornerstone of a misguided, jingoistic economic agenda that accomplished little. China didn’t live up to all of its promises under the bilateral trade framework and neither did the US. The pandemic made it impossible to hold Beijing accountable. Two months after Donald Trump and Liu He signed the so-called “phase one” trade pact, the global economy came to a standstill. Trade and commerce froze, and all other concerns were subjugated to the public health crisis.
Two years on, scarcely anyone cares about the targets established in Trump’s “momentous” deal. Trade experts and industries which benefited directly from the trade war would quibble with that contention, but I doubt pollsters could find even one average voter who could name a single provision from the agreement. Certainly, trade with China isn’t a top issue for voters in November. But inflation is, and if selectively scrapping tariffs imposed on the path to a provisional arrangement of questionable significance can help bring down consumer prices, such a move makes a lot of sense.
But much as the Biden administration was preemptively derided for prospective engagement with the Nicolás Maduro regime amid surging oil prices despite the distinct possibility that sanctions on Maduro long ago reached the point of diminishing returns, the administration will invariably be criticized as “weak on China” for lifting tariffs. The proximity of the midterms means Republicans would surely claim the White House is jeopardizing America’s “principled” stance on Xi’s government for domestic political gain.
It’s with that in mind that Biden will likely pair any rollbacks with the announcement of new initiatives designed to blunt any such criticism. In their reporting, Bloomberg mentioned “a new probe into industrial subsidies that could lead to more duties in strategic areas like technology,” for example. The Wall Street Journal, which tipped the apparently imminent decision, said Biden may also unveil “a broad framework to allow importers to request tariff waivers.”
Of course, this story has been in the market for quite a while. Speculation heated up last month when Janet Yellen told US lawmakers that Biden was considering a way to “reconfigure” the tariffs. Rollbacks, Yellen said, “could help to bring down the prices of things that people buy that are burdensome.”
That wasn’t the first time Yellen suggested the tariffs are on the table when it comes to fighting inflation. But the discussion is plagued by mixed messaging. Commerce Secretary Gina Raimondo last month said it “may make sense” to remove some tariffs on household goods and bicycles, not exactly a ringing endorsement. Just days ago, Trade Representative Katherine Tai told the Senate Appropriations subcommittee that the tariffs are “a significant piece of leverage” and cast doubt on the idea that lifting them would ameliorate inflation. “There’s a limit to what we can do with respect to inflation,” she said, adding that “a trade negotiator never walks away from leverage.”
Unless, of course, that trade negotiator is a US president staring down an economic crisis with the potential to cost his party control of Congress.
Ultimately, any move to roll back the tariffs could meet the same fate as the ineffectual release(s) from the Strategic Petroleum Reserve. It’s highly unlikely that lifting the duties will noticeably impact prices fast enough to make a difference for Democrats.
More importantly, it may be too late for households. The surge in prices for necessities has accelerated a pivot away from consumer goods, demand for which was already set to wane as Americans shifted spending to services. To the extent Biden can get prices lower for discretionary goods, it won’t much matter. Americans need relief at the gas pump and in the grocery aisles, but absent an end to hostilities in Ukraine, that can only come about through demand destruction. The Saudis aren’t inclined to help. Biden doesn’t like Mohammed bin Salman and the feeling is mutual. Besides, you could (easily) make the case that pandering to the crown prince is worse than lifting sanctions on Maduro if what you’re concerned about are human rights.
In the same remarks to lawmakers on June 8, Yellen was as forthright as she could be under the circumstances. “I want to make clear I honestly don’t think tariff policy is a panacea with respect to inflation,” she said. “Goods account for only a third of consumption and it’s not clear exactly what the incidence and pass through would be.”
All roads lead to establishment of a long term plan for energy independence and a short term plan for enough of a resolution in Ukraine to bring down the price of oil.
Too bad the US does not have the leadership to make that happen.
well said !!
What would “a short term plan for enough of a resolution in Ukraine” tp bring down the price of oil look like, and how can a different leadership in the US make that happen?
It involves a reversal on our position on sanctions- which are helping Russia and harming the Western countries.
With the reversal of tariffs on Chinese products- this could happen.
Shutting down free trade in a specific corner of the world does not work- because commodities and products can easily be sold elsewhere if there is money to be made. Followed by a settlement with Russia on the geographic division of Ukraine with a financial commitment by the West to rebuild the portion of Ukraine that survives as Ukraine- which will be smaller, but stronger.
US independence in energy, food, chips pharmaceuticals and a few other key areas would be our best plan for national defense.
Then, if China (or others) grossly misbehaves, we can cut back on excessive purchases of less essential and non-essential products coming from authoritarian dictatorships that are misbehaving and/or trying to destroy our country.
You may be correct about some of this but last time I checked not only do a huge proportion of our pharmaceuticals come from China, but the chemicals used to make them are also sourced there. We are not even remotely independent in this area. I wouldn’t be shocked to find that at least some of our military uniforms are sourced in China, Vietnam, or other parts of the Far East.
Sorry answered too fast without reading that. As you can imagine, I strongly disagree with that… 🙂
Agreed on the long term plan. On the short term one, yes but with the caveat that we do not try to twist the arms of the Ukrainians into giving up territory to Russia.
We need to defeat Russia on the battlefield. The Ukrainians have shown willing in terms of paying the blood price. The least we can do is support them to victory.
Actually, I agree with supporting the Ukrainians- for a set period of time. The problem now is that we are not fully engaged with support- so, as a result this could end up dragging on and being another Afghanistan.
I think Russia is running out quite fast of military hardware and manpower. So it’s not a given that we don’t see meaningful ground evolution within a few months if Russia still insists on not declaring war and thus remains hampered in mobilizing.
Just my hope, though, I am no military expert.
And, obviously, it would be for the best if we provided enough equipment for Ukrainians to be able to turn the tide faster, no disagreement there… 🙂
H-Man, maybe to little to late but eliminating a tax on imported goods helps and Biden needs all the help he can get.
He and the Dems are toast, imho. Hopefully they right the ship by 2024… and/or Trump gets indicted. Though, I don’t know how that would pan out. He’s clearly guilty of enough stuff to warrant jailtime… but jailing politicians is a tricky business because it certainly looks bad if you’re on the opposite side of the aisle and prosecuting.
And R politicos would happily play both sides : relieved someone is dealing with Trump for them AND fanning the flames of their base’s rage.
Lock her up! Lock her up! Lock her up! USA! It didn’t sound like the right had any reservations about jailing politicians a few years ago. Karma is so cool.
They chanted it. They didn’t actually do it.
Apparently the Justice Department tried for two years but didn’t get the job done.
“Back in 2017, buoyed by President Donald Trump’s calls for investigations into “Crooked Hillary & the Dems,” the Justice Department launched an inquiry into Hillary Clinton and Republicans’ pet conspiracy theories about her and her career.” https://www.vanityfair.com/news/2020/01/hillary-clinton-justice-department-investigation-results
If tRump doesn’t go to jail, we are a banana republic and there are no rules for the next autocrat. Buckle up!